That is true in some regards. There is no predefined limitation, but the limitation will be influenced by a few things:
1) Quota in the config.xml file. By Default the webSQLQuota is set to 5MB. If the open db call exceeds this quota then it will cause an exception.
2) Location of database (by default, it is set to the location of the install path) – you can change this to be a different location including a storage card. Either way the 'holder container' (i.e device or storage card) will influence how large the database file can be.
3) Performance expectations and use by the application. Hard to say what the rule of thumb is here, but depending on the actually SQL query and the size of records (i.e. simple text or blobs of binary) will determine the maximum acceptable.
A simple way to test this is to:
1) Load RhoElements app that creates a database and take the .db file that was created on the device (look in location referenced by config file)
2) Copy the device db file to your desktop and use a standard SQLite tool to run queries to load many records
3) Copy the file back to the device in the same location (without RhoElements running) and test how it performs.