Update (2016/03/31): that limit does NOT exists anymore using Xamarin.iOS 9.6.1
As of Xamarin.iOS 9.8.1 there is no Starter edition anymore and the new Community edition that replace it has no size limit.
Update: the limit was increased to 128KB in Xamarin.iOS 8.4
Update: the limit was increased to 64KB in Xamarin.iOS 6.2
Remember that it is 32KB of user code.
You get all the .NET class libraries (BCL), the iOS API, MonoTouch.Dialog (for UI), web services, Data (e.g. sqlite) ... and even unit testing code at your disposal. None of it counts as user code (so they are not part of the 32KB limit).
E.g. an hello world app (not a great benchmark, it will be mostly generated code) will take about 4KB.
A better way to see what's possible and learn about C# development on iOS is to look at the samples available on github. Most of them fits under this limit.