Apparently there is more to it than the number of messages a users sees when he hasn't logged in for a long time?

That's essentially it. If a user is away for a few weeks and the number of new posts is 300, then the user would only see 200 new messages if the "number" is set to 200. If the number was set to 500, then th user would miss no messages unless ober 500 new message swere posted since the user's last visit.

The latest code has the number set at 500.

Another aspect of the number is it is how many messages are shown as new to new members.