When the backpack reaches maximum capacity either Gears or Items, it can no longer store more Gear or Item respectively. Gear will not be placed in the inventory and chests cannot be opened while the backpack is full on Items, which prevents progress towards any of the Chest Badges.
Old Backpack - New players start with an Old Backpack. It can store up to 10 Items and 100 Gears.
Small Backpack - Automatically upgraded from the Old Backpack at level 10. It can store up to 20 Items and 200 Gears.