This setting only has an effect when "Show full path in folder title" is checked.

Enter the maximum number of characters that may be displayed for the path name in the title. If the path name is longer than this number, it will be truncated. The last part of the folder path (the folder "real name") will always be displayed.

Example:
might be truncated to

You might want to raise the default limit if you have a high screen resolution or use a small font for window titles.