Quick answer: Yes, the setting Limit zoom level changes the behavior of the minimum display width of chords.
Minimum display width of chordsTypically, in your arrangement, chords will have a different length unless all chords are equal. In Liquid Notes, the length of a chord is displayed via the width of the chord area for that particular chord. This will be detected automatically by the harmonic analysis, which lays out the chords for you.
If your arrangement has a long chord it may happen that a chord area spans the entire width of the Liquid Notes window, or even more than that. In that case you may want to zoom out further to have that chord area show smaller, yet you may be limited by the minimum display width of other chords.
For such a case, there is a setting Limit zoom level in Liquid Notes that sets the minimum display width of chords to zero:
If you disable this feature, chords will turn into fading lines when reaching the minimum display width of the control elements of a chord area!