This is to preserve a lag-free environment. In Minecraft, when there are a large number of mobs in one chunk or group it puts a lot of strain on the server and risks degrading the performance of the server. We prefer to keep our server running at a constant 20 TPS.
This limit applies to animals, villagers, and monsters, any over the limit will be automatically removed.
Entities such as item frames are limited to 30 per chunk or per group.
Entities that are over the limit will automatically be removed.
You cannot have a group of villagers larger than ~30.