It's maximum number of units for the player or the AI at any given time.
I play a mod where you only can have 7 instances of the industrial and modern units. It makes war in the late game less drawn out. If you limit units throughout the game you get a wierd situation where it's hard to attack, because you only have a few units. It's interesting though. You dont want to upgrade, because that means you have less units.I play with less ground units but unlimited air and sea. This makes for wars with a lot of naval and air action.