There is a technical limit (2083 characters is the max for most browsers) and there is a practical length for marketing purposes - there is substantial testing that shorter urls are clicked on more often.
Google will handle very long urls (at least 1000 characters) but the search results page will break them into several lines and even truncate the visible url. Make the urls truly friendly - as short as is practical for your site. If you do that you are not likely to hit any technical limits.
Here's a related discussion - first begiun at SERoundtable [seroundtable.com] and then picked up by Jaime from Google [google.com]'s search team.
When it comes to a page's URL, there are basically two competing goals we're trying to balance:
(1) providing enough info to help you make an informed decision on which result to click (2) presenting results in a easily readable and scannable format
Here's where the balancing act comes in: to accomplish goal #2, we'll sometimes omit parts of a URL (replacing them with ellipses) when we determine that those parts aren't critical to representing the page, and when doing so makes the search results page more readable. Not wanting to miss on goal #1, however, we won't leave out the page's host or domain, since we think it's important to know which website you're navigating to when you choose a result to click.