temperature setting question

James, it would be the high temperature limit in the tank. The high limit is usually around 160 F. You should also take into consideration the location of the sensor on the tank. If it is near the bottom, and it reaches 160 F, then the top of the tank would be above this temperature and could cause safety issues.
 There should be a T & P relief valve on the tank to ensure that temperatures and pressures do not reach unsafe levels.
 The best way to make sure that there is no problem is to monitor the system, especially on sunny days. In the summer you may want to move the sensor near the top of the tank to prevent overheating and in the winter move it near the bottom to gain the maximum amount of heat over the now shorter day. Some of the newer, heat exchanger tanks have a well in the middle of tank which is also a good location for year round use.