Well, I don't think it's intended to enforce a bound on the maximum length of any possible path, but rather the maximum size of a pathname that you can pass as an argument to stuff like open() or stat(). I formed this impression by reading the sections on limits.h and pathconf() in the Open Group (aka POSIX, more or less) specs at http://www.opengroup.org/onlinepubs/007904975/toc.htm
I haven't read that bit of that document that closely :-)
David