From the game's encyclopedia
The Domain Limit determines how many Holdings you can legally have in your Domain. The Domain Limit is affected by many things, such as your Succession Law and the tier of your Primary Title.
Although you can go above your Domain Limit, doing so will lower your Income and Vassal Opinions.
The game's text for patch 1.20.1.2. Words in blue are entries of the encyclopedia: hover one to read it, as in the game.
Domain Limit is an entry of Crusader Kings III's in-game encyclopedia. The game explains it: "The Domain Limit determines how many Holdings you can legally have in your Domain." Patch 1.20.1.2, from game/common/game_concepts/00_game_concepts.txt and game/localization/english/game_concepts_l_english.yml.
Source: game/common/game_concepts/00_game_concepts.txt, game/localization/english/game_concepts_l_english.yml and the English localisation, Crusader Kings III 1.20.1.2.