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It means the person referred to is the most outrageous, or the most whatever is being referred to, of anyone the speaker knows. If you are obsessed with football, for example, and all you ever talk about is football, i might say that you are the absolute limit, and i would mean that you are more obsessed with football than anyone else i know.

We humans are limited creatures. We can go so far--in any sense--and no further.

"You are the limit" means "you go as far as it is possible for a human being to go and still remain human".