Inspector - max size parameter of image

what exactly does the “max size” setting do?

if i have a 512x1024 image, should I set the max size to 512 or 1024?

If you set it to 512 it will be reduced to 256 * 512. Let’s say your artist creates this huge texture for your 4K windows game on high end hardware, but the same game goes onto mobile. then you just change the max size to the lowest size that’s just enough to look good and you reduced the size without keeping each variation of it somewhere in the project.