What does setting reserved concurrency of 50 on a Lambda function do?

Reserved concurrency does two things for one function. It guarantees 50 concurrent executions, and it also limits the function to 50. Extra requests are throttled. This is useful to protect a downstream database from too many connections.

"Keeps 50 execution environments initialized at all times to avoid cold starts" is the usual mix-up. Reserved concurrency does not pre-warm anything. Keeping environments ready is a different setting called provisioned concurrency.