If you are simply looking to enjoy photography as a hobby, being satisfied with where you are is a great place to be. Why? You have no pressure to push you to higher levels, so relax and just make images. Over time you'll see improvements, but there is no rush. Everyone hits the peak of their skills at one time or another, and that isn't a bad thing. That doesn't mean that you stop trying to improve, but if you get uptight about your image making it wont help either.
Knowing the limits of ones abilities is particularly important for anyone looking to work professionally as a photographer. When you are presented with a possible contract from a client you need to be sure that you can meet your clients needs. Failing to do so will not only hurt your relationship with that client, but could affect your reputation as a photographer. Be honest with your abilities and if that does not meet the clients needs it is okay for you to part ways. That might seem hard, especially if work is few and far between, but it is better to be honest and walk away on good terms. What might not be good for one client, could be exactly what someone they know is looking for!
Another great aspect of knowing your limits is that it helps you to see when you need help! Asking for help might not be easy, but getting past that could result in a wealth of useful information.