Carrying capacity is the ability of a certain region of the earth or even the entire earth to sustain life. This amount is closely related to the Malthusian scenario.
Population increases will slow down when we near carrying capacity for our race, but long before then we will have entered famine. Human population growth traditionally has always paralleled and bordered the carrying capacity of the time. As the carrying capacity rises (through methods such as division of labor, agriculture, three-field system, four-field system, irrigating, terracing, pesticides, herbicides, the plow, oxen, wheelbarrows, tractors, fertilizers, etc.), so does the actual population of humanity on this world, which then results in increased carrying capacity from more people working the lands. In modern times, the carrying capacity has shot up as never before, and the conservative belief is that it will continue to climb for a long time to come.
Carrying capacity also depends on our method of living. Restriction of what foods we eat, competition with animals and plants for food, and eating higher up on the food chain (cows instead of corn; chicken instead of cashews) all result in reduced carrying capacity. Therefore, there have been many efforts to eradicate pests and non-livestock animals, to reduce people's allergies to certain foods, and to promote eating "greens" such as vegetables and fruits.
Contrast this with Maximum Carrying Capacity.