The size meter indicates how much building you've done. So, You're correct. When it's full you can't build or plant anything else.
It means you're reaching your limit on how much you can add to your settlement (buildings, furniture, etc.) and it seems that makes settlers unhappy when you go past green.
There's a trick to bring it down, drop a bunch of guns (I used institute pistols) and deconstruct them in build mode. It tricks the game into thinking that you're scrapping junk from your settlement.
I think it's there to avoid performance issues on consoles...if you build too much stuff in one spot it'll probably cause lag and whatnot.
https://www.youtube.com/watch?v=TszQTVO6KpU
youre welcome