I keep PS at about 20 levels/states of History - I usually do a LOT of dabbling with paint or other things (Healing Brush, Stamp, Curves/Paths, etc.) and I mow through the history and realize what I needed to know was about 40 clicks back - too late...

I think you can set it up to 99 history states - I'm usually working on MAMMOTH file sizes so I like to keep my RAM fairly clear so I don't get as much lag in operations.