Constraints are, as you said, the LIMITS (Upper and Lower) of the input data, and are VERY important when considering the solution of a problem. They give an idea of the data types to be used, approach to be adopted etc.
Eg-
Lets say input constraint of an integer n is 10^15. (10 raised to power 15)
This means that-
1)Using int to store the data will result in overflow (Here it hinted on data type to be used)
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If you think of creating an array of this size, you’d exceed memory limit of code and hence arrays cannot be used (here it ruled out any approach using arrays)
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With n this large (if its something we have to iterate over), a nested loop or anything using slower algo like O(n^2) will usually give TLE (exceed time limit. Since operations to be performed are a lot)
And many more! You’d get the idea as you progress and practie!
Hope it helped, happy coding! 