The current level cap for Forza Motorsport 4 is set at 150, and while that's insanely high, some players are already capped out. At a Microsoft press briefing, Turn 10's Dan Greenawalt said that they designed the game so that their most dedicated, hardcore fans would would need between 9 and 12 months to reach that limit. It turns out that those people suprised Turn 10 by reaching that limit in only 4 months.
With the upcoming March 6 release of Forza 4's title update #3 the level cap jumps up to 999. That sounds like a crazy number, but Greenawalt says that their goal is to not have a cap at all. He says that a very small percentage of players ever top out, but it's important for them to have that level number as a bragging right.
Greenawalt says that their data shows that the Forza community is playing this game about twice as much as they did with Forza Motorsport 3, so this level bump should keep them busy for a bit longer.