What are bid limits on a Google Ads bid strategy?

Where they apply is narrow. Google says that if you do set bid limits, they'll be used in Search Network auctions only, and that they're only available for portfolio, not standard, Target CPA bid strategies. For Target ROAS, it says bid limits are available for Search and Shopping portfolio bid strategies. The minimum is not a floor either: Google says its bidding algorithm might set a maximum CPC bid that's below your minimum bid limit, generally due to smart pricing, so the bid limit you set isn't the absolute lowest bid that could be set.

Google reports when they bite. Its bid strategy statuses page lists bid limits among the reasons a strategy can be Limited: maximum and/or minimum bid limits are preventing your bids from being fully optimised. Its example is 95% of spend limited by your maximum bid limit, meaning that for 95% of spend your bid strategy would have set a higher bid but was prevented from doing so by the max bid limit. Google's explanations also cover bid limit changes: how setting or changing bid limits affect automatic optimisation of your bids.

Our reading, not Google's: a bid limit puts a manual control inside an automated strategy, and the Limited status says how much of the spend it is overriding. A strategy limited by its maximum bid limit on most of its spend is, in effect, being bid by the limit, and is worth judging that way before anyone blames the target.