It is the limit put on the amount of runs scored in a inning or game in which the game automatically ends. this can be different amounts of runs and usually has an amount of runs after each inning that you will be leading by. for example if you are leading by 12 runs after 4 innings game is over, 10 runs after 5 innings, etc
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A mercy rule is when the opposing team gets 5 consecutive runs, the game is called (over). Unfortunately and unfairly in Wii, when you go ahead 5 runs over the opponent, there is no mercy rule. In other words, you can go ahead 24 and 2 over the computer and the game isn't called but if the score is 6-1 in favor of the computer, the game is done. It's ridiculous and it can't be turned off.
When a team is losing by a certain amount of points after a certain inning, the game is automatically won by the dominating team.