By default, Mastodon has a 500 character limit for posts.
However, you may have seen posts with more than 500 characters.
This is possible because Mastodon is just one type of server on the Fediverse. Many of the accounts you interact with on here may be using different server types with different character limits.
For example, there are modified "forked" versions of Mastodon such as Glitch (https://glitch-soc.github.io/docs/) and Hometown (https://github.com/hometown-fork/hometown) which allow server admins to easily change the character limits.
There are also completely different kinds of servers such as Friendica (https://friendi.ca) which have much larger default limits.
Because the Fediverse uses a common technical standard for communication, different kinds of servers talk to each other seamlessly, and you won't necessarily notice which server types people use. (I'm on a server running Glitch Mastodon, which is how this post can be so long.)
@feditips and then in comes me with 5000 limit on mine ;P
And then in comes some with something like a 60,000+ limit XD