I don't know how to fix this error?

"Upvalue" means "variable" (more or less).

It says that it can't index (using the . on) valid_target because it is a boolean value.

A boolean value is either true or false; we should look wherever we set valid_target to see how it might become true or false.

valid_target = true -- LINE 26

Probably, you meant to use valid_target.Value like in all of the other ones.

This is a lot longer than it needs to be.

Almost all of them use hum as a check. Just make another if to differentiate. These sames ones also require target.Parent:IsA("Model").

Most of those also use not player (the remainder use player) so another if else.

There remains a bunch of redundant checks, too with friend enemy book.

You get segments like this:

                    if current_target.Value ~= target.Parent then
                        mouse.Icon = "http://www.roblox.com/asset/?id=187412859"
                        selection.Adornee = target.Parent
                        valid_target.Value = true
                    elseif current_target.Value == target.Parent then
                        mouse.Icon = "http://www.roblox.com/asset/?id=187412859"
                        selection.Adornee = target.Parent
                        valid_target = true
                    end

Which are pointless, since they do the same thing and at least one will always trigger.

We get this (I might have made a typo -- but at least make your code look like this! It's much more understandable)

....

mouse.Move:connect(function()
    local target = mouse.Target
    if target ~= nil then
        local hum = target.Parent:FindFirstChild("Humanoid")
        local enemy = target.Parent:FindFirstChild("enemy")
        local player = target.Parent:FindFirstChild("player")
        local book = target.Parent:FindFirstChild("book")
        local friend = target.Parent:FindFirstChild("friend")
        if hum and target.Parent:IsA("Model") then
            if player then
                mouse.Icon = "http://www.roblox.com/asset/?id=187425092"
                selection.Adornee = target.Parent
                valid_target.Value = true
            else
                if enemy then
                    mouse.Icon = "http://www.roblox.com/asset/?id=187412859"
                    selection.Adornee = target.Parent
                    valid_target.Value = true
                end
                if book then
                    mouse.Icon = "http://www.roblox.com/asset/?id=187412830"
                    selection.Adornee = target.Parent
                    valid_target.Value = true
                end
                if friend then
                    mouse.Icon = "http://www.roblox.com/asset/?id=187412846"
                    selection.Adornee = target.Parent
                    valid_target.Value = true
                end
            end
        elseif current_target.Value ~= target.Parent then
            mouse.Icon = "http://www.roblox.com/asset/?id=187412806"
            selection.Adornee = nil
            valid_target.Value = false
        end
    else
        mouse.Icon = "http://www.roblox.com/asset/?id=187412806"
        selection.Adornee = nil
        valid_target.Value = false
    end
end)

You repeatedly refer to target.Parent (and in fact never target itself) after the check that it's not nil (although if target then would suffice and be cleaner), so let's make a variable for it.

We can collapse the weird ifs next to each other into one big elseif (in case they aren't mutually exclusive, I reversed the order to preserve the same effect)

....

mouse.Move:connect(function()
    local target = mouse.Target
    if target then
        local model = target.Parent
        local hum = model:FindFirstChild("Humanoid")
        local enemy = model:FindFirstChild("enemy")
        local player = model:FindFirstChild("player")
        local book = model:FindFirstChild("book")
        local friend = model:FindFirstChild("friend")
        if hum and model:IsA("Model") then
            if friend then
                mouse.Icon = "http://www.roblox.com/asset/?id=187412846"
                selection.Adornee = model
                valid_target.Value = true
            elseif book then
                mouse.Icon = "http://www.roblox.com/asset/?id=187412830"
                selection.Adornee = model
                valid_target.Value = true
            elseif enemy then
                mouse.Icon = "http://www.roblox.com/asset/?id=187412859"
                selection.Adornee = model
                valid_target.Value = true
            elseif player then
                mouse.Icon = "http://www.roblox.com/asset/?id=187425092"
                selection.Adornee = model
                valid_target.Value = true
            end
        elseif current_target.Value ~= model then
            mouse.Icon = "http://www.roblox.com/asset/?id=187412806"
            selection.Adornee = nil
            valid_target.Value = false
        end
    else
        mouse.Icon = "http://www.roblox.com/asset/?id=187412806"
        selection.Adornee = nil
        valid_target.Value = false
    end
end)

You have some code repeated at the end. Instead of using else, you should just set it at the beginning and let other things override it, to be much briefer.

You also repeat a bunch of code for each "type" of thing, we can simplify that with a variable, too:

mouse.Move:connect(function()
    local target = mouse.Target
    -- No target:
    mouse.Icon = "http://www.roblox.com/asset/?id=187412806"
    selection.Adornee = nil
    valid_target.Value = false
    -- Maybe a target:
    if target then
        local model = target.Parent
        local hum = model:FindFirstChild("Humanoid")
        local enemy = model:FindFirstChild("enemy")
        local player = model:FindFirstChild("player")
        local book = model:FindFirstChild("book")
        local friend = model:FindFirstChild("friend")
        if hum and model:IsA("Model") then
            local icon = nil
            if friend then
                icon = 187412846
            elseif book then
                icon = 187412830
            elseif enemy then
                icon = 187412859
            elseif player then
                icon = 187425092
            end
            if icon then
                selection.Adornee = model
                valid_target.Value = true
                mouse.Icon = "rbxassetid://" .. icon
            end
        end
    end
end)

This Move function is a lot cleaner this way.

It cut keywords from 39 to 30 (23% smaller)

This has cut lines down from 55 lines to 33 (40% smaller)

This has cut characters from 2576 to 847 (67% smaller)

Shorter code is more understandable and easier to work with. Big code means big problems and big confusion. Keep it tiny!