After a quick look, looks like it tries to split the (unencrypted) hostname into multiple packets, or at least scramble it slightly. I'm not sure how much it helps in practice, but it might help against naïve filtering/scanning, as the hostname is either sent in different packets, or split and sent unordered in the same packet. It probably only helps if encrypted client hello isn't supported.

TL;DR: If I've understood everything correctly, it just moves chunks of the plaintext hostname around & tries to split it into multiple packets.

Note: Mostly based on comments, as it's late & I'm too tired to parse too much cryptography code.

Full source of the limit_chunks function, formatted with Rustfmt:

const fn limit_chunks<'a>(
    left: (u64, &'a [u8]),
    right: (u64, &'a [u8]),
    limit: usize,
) -> ((u64, &'a [u8]), (u64, &'a [u8])) {
    let (left_offset, mut left) = left;
    let (mut right_offset, mut right) = right;
    if left.len() + right.len() <= limit {
        // Nothing to do. Both chunks will fit into one packet, meaning the SNI isn't spread
        // over multiple packets. But at least it's in two unordered CRYPTO frames.
    } else if left.len() <= limit {
        // `left` is short enough to fit into this packet. So send from the *end*
        // of `right`, so that the second half of the SNI is in another packet.
        let right_len = right.len() + left.len() - limit;
        right_offset += right_len as u64;
        (_, right) = right.split_at(right_len);
    } else if right.len() <= limit {
        // `right` is short enough to fit into this packet. So only send a part of `left`.
        // The SNI begins at the end of `left`, so send the beginnig of it in this packet.
        (left, _) = left.split_at(limit - right.len());
    } else {
        // Both chunks are too long to fit into one packet. Just send a part of each.
        (left, _) = left.split_at(limit / 2);
        (right, _) = right.split_at(limit / 2);
    }
    ((left_offset, left), (right_offset, right))
}

Same, but for write_chunk:

fn write_chunk<B: Buffer>(
    offset: u64,
    data: &[u8],
    builder: &mut packet::Builder<B>,
) -> Option<(u64, usize)> {
    let mut header_len = 1 + Encoder::varint_len(offset) + 1;

    // Don't bother if there isn't room for the header and some data.
    if builder.remaining() < header_len + 1 {
        return None;
    }
    // Calculate length of data based on the minimum of:
    // - available data
    // - remaining space, less the header, which counts only one byte for the length at
    //   first to avoid underestimating length
    let length = min(data.len(), builder.remaining() - header_len);
    header_len += Encoder::varint_len(u64::try_from(length).expect("usize fits in u64")) - 1;
    let length = min(data.len(), builder.remaining() - header_len);

    builder.encode_varint(FrameType::Crypto);
    builder.encode_varint(offset);
    builder.encode_vvec(&data[..length]);
    Some((offset, length))
}

Link to the MIT license file