This setting only has an effect when "Show full path in folder title" is checked.

Enter the maximum number of characters that may be displayed for the path name in the title. If the path name is longer than this number, it will be truncated. The last part of the folder path (the folder "real name") will always be displayed.

Example:
might be truncated to

I have found a setting around 30 characters to be useful. If you use a small font for window titles, you may want to increase this number.

Note that changing this setting will not apply to folders that are presently open (including the desktop). Open another folder to see the difference.