This setting helps you keep your system from running out of memory due to too many processes. It lets you set the maximum number of child processes that sendmail will spawn. Putting a limit on the number of processes will keep you from running out of memory. If you figure that each sendmail process uses about two megabytes of memory, then decide how much total memory you want to spend on mail handling and do the division. I have two gigabytes on my current machine, and I figure I can waste half of that on mail, so one gigabyte divided by 2 megabytes is 500:
Typically I have more like 200 sendmail processes going, but I have run into the 500-process limit on occasion. When that happens, sendmail just stops accepting new connections until some of the existing processes finish.