Limit current in source meter machines is crucial for preventing circuit damage by controlling the maximum output current. The current limit is physically set using an adjustment knob, which allows the user to define a safe maximum current level. When this limit is reached, the device reduces voltage to maintain the set current, with an LED indicating activation of the current limiter. While the discussion touches on resistivity, it is not directly addressed in the provided documentation. Understanding these concepts is essential for effectively using source meter machines in various applications.