SharePoint store all the uploaded documents in the database. Having a restriction on the file upload size is always a good idea. You can do this two ways,
1. Give a upload file size limit under general setting of the web application in the central administration.
2. Modify the metabase.xml file on the IIS server.
a. Before you can edit the metabase.xml file you must tell IIS to allow you to edit the file. In IIS, right click the name of the server and select properties. Check “Enable Direct Metabase Edit”.
b. Find the metabase.xml file located in C:\windows\sytem32\inetserv and open the file in Notepad.
c. Search for AspMaxRequestEntityAllowed and increase the value. The default value is 204800 (200K). Setting the value to 1000000 will allow 1 MB file uploads.
d. You may now wish to uncheck the IIS property called “Enable Direct Metabase Edit”.
To increase the file download size limit, repeat all steps above but in Step 3 find the parameter called AspBufferingLimit. The default download limit is 4MB.