Within the league details screen, there are two fields that specify how your online registrations will work:
If the "Allow registration" checkbox is checked, teams will be able to register for the league online, via the registration section of the website.
The team count number specifies how many teams can be registered into each season before teams who register online start receiving a "This league is full, but if anyone drops out we'll call you" message instead of a "Thanks for registering, welcome to the league!" message. Both of these messages are configurable via the auto text configuration section of the control panel.
The values of these fields are only of pertinence to online registrations. You can go over the team count when you create teams manually and you can manually register teams into a league even if the "Allow registrations" checkbox is unchecked.