A limit is the value that a function (or sequence) approaches as the input (or index) approaches some value. So say you had a function f(x) = 2x. The limit as x approaches 2 would be 4. Limits are also useful when trying to estimate values of a function that do not exist. Say you have the function f(x) = 1/x. You can take the limit as x approaches 0 to estimate that the value at 0 could be ±∞ if such a value existed.
On OnlineSequencer, the effect titled "limit" is a waveshaping distortion that non-linearly converts the input volume to another input volume using the hyperbolic tan function (tanh) on a range of -1 to 1. You can get a similar effect in another waveshaper using the function f(x) = tanh(3x).
It is important to note that the input to the waveshaper on OnlineSequencer is constant and the slider fades between the wet and dry signal, rather than controlling the input. You can control the input using note velocity though if you want to experiment with how the different waveshaping functions change the sound as its input changes. Limits also can refer to personal boundaries.