The blocksize limit is the maximum size of each block, in terms of data, in the blockchain. It therefore limits the number of transactions that a miner can include in each block.
Satoshi arbitrarily chose a 1MB blocksize limit to prevent the blockchain getting too big too quickly. He stated that it would probably need to be raised in the future. However, it will require a hard fork to the Bitcoin protocol and is quite controversial due to concerns about the centralisation of full Bitcoin nodes and the effect it will have on miners’ transaction fees.