SharePoint has several configurable limits to help maintain farm performance. At the Web application level there are configurable throttles and limits. These have been added so that operations from individual users or processes do not adversely affect farm performance. For example, the list view threshold is a limit that prevents queries that affect more than a certain number of list items.
In terms of lookups - the blog posts below do a good job of explaining the limitations in detail:
While it's certainly possible to increase the threshold to a number higher than 5000, it's generally not recommended as it may have adverse performance implications for the wider SharePoint system. This of course depends on various things including but not limited to performance of the underlying hardware.
To get around these limitations, we recommend that our customers try to:
- Understand how the limitation works
- Plan your views to stay within limits
- Archive content on a regular basis for large lists (ShareGate is probably the best tool around for making this as fool-proof as possible and it preserves versions and important metadata such as Created By, Modified By, Created Date, Modified Date etc. Let us know if you would like to buy a license)