If you try to save the list as a template that is larger than this you will get the following error:
The list is too large to save as a template. The size of a template cannot exceed 10485760 bytes.
To increase the maximum size, simply run the following stsadm command (from the C:\Program Files\Common Files\Microsoft Shared\web server extensions\12\BIN directory) replacing the propertyvalue to the new maximum size (in bytes):
stsadm -o setproperty -propertyname max-template-document-size -propertyvalue 50000000
Points to note:
1.The propertyvalue parameter is in bytes, so the example above will increase the maximum size to approx 50MB.
2.There is a hard limit of 500MB so the value must be less than 524288000 or you will get an error when saving the list as a template.
3.The above increases the maximum size of both site and list templates.