Okay, so you know how a town is a place where lots of people live and work, right? Well, those towns sometimes have a special area around them that they call their "town limits." This is like a line that goes around the edge of the town, and it shows where the town ends and where the next town or area begins.
When you live inside the town limits, you are a part of that town and you might have to follow certain rules or pay certain taxes that are set by the people who run the town. But if you live outside the town limits, you might be in a different town or area, and you might have different rules or taxes to follow.
Think of it like playing a game with a big playground. The playground has an invisible line around it that shows where the playground ends and where you're not supposed to go. The town limits are like that line, and they show where the town ends and where other towns or areas begin.