"Reservation", known explicitly as "Caste-based Reservation", was first introduced in the Raj. This reservation is for the Scheduled Castes, Dalits, Scheduled Tribes and Other Backward Classes.
For now, the Supreme Court has put a 50% cap on the reservations overall. It was done so that the ruling government does not increase the reservation to new groups to receive support for the next elections from a particular community.
How & why did 50% come into being?
In 1992, the landmark verdict of Indira Sawhney vs Union of India ruled the 50% capping of reservations based on castes. It said, "no provision of reservation or preference can be so vigorously pursued as to destroy the very concept of equality."
"Since this Court has consistently held that the reservation under Articles 15(4) and 16(4) should not exceed 50% and the States and the Union have by and large accepted this as correct it should be held as constitutional prohibition and any reservation beyond 50% would be liable to be struck down."
Even the courts are not sure why 50% reservation is reasonable. The court never took the population as one factor while deciding this limit.
"Just as every power must be exercised reasonably and fairly, the power conferred by Clause (4) of Article 16 should also be exercised in a fair manner and within reasonable limits – and what is more reasonable than to say that reservation under Clause (4) shall not exceed 50% of the appointments or posts, barring certain extraordinary situations as explained hereinafter...."
How did this rule come into play?
The Janata Party was the ruling party in 1979. It constituted the Second Backward Classes Commission, commonly known as the Mandal Commission. This commission's main objective was to identify India's socially or educationally backward classes.
Its report came in 1980, which stated that a vast mass of castes broadly fit the "shudra" category of the caste system. This conglomeration was called the OBCs (Other Backward Classes).
Action on this report was taken nearly a decade later by the government of V.P. Singh, which resulted in the famous Indra Sawhney judgment.
The curious case of Tamil Nadu's reservation status
Tamil Nadu's state assembly passed the "Tamil Nadu Backward Classes, Scheduled Castes and Scheduled Tribes (Reservation of Seats in Educational Institutions and Appointments or Posts in the Services under the State) Act, 1993" to keep its reservation limit intact at 69%. It was done so that the 69% reservation does not get lost with the coming of the Indra Sawhney judgement. This move further made it more confusing to understand the reservation status in the state.
Why is the topic trending nowadays?
The Supreme Court is now hearing a challenge to the validity of "Maharashtra's Socially and Educationally Backward Classes Act, 2018", which grants reservations to the Maratha community.
Earlier, the Bombay High Court had upheld the validity of the Act but also read down some of its sections. These sections were 4(1)(a) and (b). By removing them, the court stated that 16% reservation is not justifiable and reservation should not exceed 13% in employment and 12% in education.
The Supreme Court recently stated that the 50% ceiling on reservations in educational institutions and jobs needs to be answered in the context of society's "changed social dynamics". However, in the author's opinion, the Indra Sawhney judgement should not be reconsidered. Increasing the 50% cap would lead to political pressure to not remove reservations at all.
 AIR 1993 SC 477  Explainer: Why is caste-based reservation in India capped at 50%?, https://scroll.in/article/890512/explainer-why-is-caste-based-reservation-in-india-capped-at-50 (last visited Mar 26, 2021)  Explainer: The 1993 SC Judgment Capping Quotas at 50%, Disallowing Them for the Poor The Wire, https://thewire.in/law/supreme-court-indra-sawhney-reservation (last visited Mar 26, 2021) Explained: Marathas, quota demand, and community's importance in state politics The Indian Express, https://indianexpress.com/article/explained/marathas-quota-demand-and-communitys-import-in-state-politics-maratha-verdict-devendra-fadnavis-5803793/ (last visited Mar 26, 2021)