Yes, it could be a problem. You could be subject to a substantial fine.
It's a huge problem!
Smoke free means just that. And yes, it does apply to incense! The next guest in the room may have allergies and when they check in they're going to complain to the front desk. Then the front desk has to reconfigure the guest rooms and move the guest to another room and put that room you were in out of service.
well "smoke-free" refers to no smoking cigarettes pipes cigars and the like... NOT incense
if people did complain just say it is for religious meditation purposes
however if you are in the habit of going to hotels and like the incense smell the other option is an oil burner
They could and there may be a fine; to be really sure you really should check with the hotel. All it takes is one complaint.
the hotels are called "smoke free" - figure it out.