What I mean by this is a subset (superset?) that exactly matches the parsing behavior of a specific target parsing library. Why is this useful? To avoid the class of vulnerabilities that rely on the same JSON being handled differently by two different parsers (you can exploit this to get around an authorization layer, for example).
The nesting is limited by using an int as the depth counter. The C standard guarantees that MAX_INT is at least 32767, so that’s a limit on portable nesting depth. Nowadays int is typically 32 or 64 bits, so a much higher limit in typical C implementations.
If I see correctly, the library doesn’t check for overflow, however. This might conceivably be an exploitable vulnerability (and such an overflow would constitute UB).