Of course this also means that you couldn't search in these fields or do anything else you'd do directly on the database.
TOAST tables were added in 7.1 AFAIK which lifted that limit and allowed for arbitrary sized rows by moving the big fields away into their own storage.
The old functionality is still there (http://www.postgresql.org/docs/9.0/interactive/largeobjects....) though I totally failed and still fail to see any practical use.