Basically tor provides a distributed network of servers ("onion routers"). Users bounce their TCP streams -- web traffic, ftp, ssh, etc -- around the routers, and recipients, observers, and even the routers themselves have difficulty tracking the source of the stream.
You probably don't need to adjust this. It has no effect on Windows since that platform lacks getrlimit(). (Default: 1000)
The following options are useful only for clients (that is, if SocksPort is non-zero):
The separation between ReachableORAddresses and ReachableDirAddresses is only interesting when you are connecting through proxies (see HttpProxy and HttpsProxy). Most proxies limit TLS connections (which Tor uses to connect to Onion Routers) to port 443, and some limit HTTP GET requests (which Tor uses for fetching directory information) to port 80.
The following options are useful only for servers (that is, if ORPort is non-zero):
For example, "accept 18.7.22.69:*,reject 18.0.0.0/8:*,accept *:*" would reject any traffic destined for MIT except for web.mit.edu, and accept anything else.
To specify all internal and link-local networks (including 0.0.0.0/8, 169.254.0.0/16, 127.0.0.0/8, 192.168.0.0/16, 10.0.0.0/8, and 172.16.0.0/12), you can use the "private" alias instead of an address. These addresses are rejected by default (at the beginning of your exit policy) unless you set the ExitPolicyRejectPrivate config option to 0. For example, once you've done that, you could allow HTTP to 127.0.0.1 and block all other connections to internal networks with "accept 127.0.0.1:80,reject private:*". See RFC 1918 and RFC 3330 for more details about internal and reserved IP address space.
This directive can be specified multiple times so you don't have to put it all on one line.
Policies are considered first to last, and the first match wins. If you want to _replace_ the default exit policy, end your exit policy with either a reject *:* or an accept *:*. Otherwise, you're _augmenting_ (prepending to) the default exit policy. The default exit policy is:
The following options are useful only for directory servers (that is, if DirPort is non-zero):
The following options are used to configure a hidden service.