The system load average is a performance metric used to represent how much work a system is doing. When you log into your mail server (assuming a UNIX type system), you can type the uptime command to see the load average over the last minute, 5 minutes, and 15 minutes. Here's an example from a production server:
sh$ uptime
10:53am up 248 day(s), 36 min(s), 12 users, load average: 0.28, 0.29, 0.30
So the 5 minute load average is 0.28, the load average for the last 5 minutes is 0.29, etc. In this case you can see that the system's load is lowering slightly over time.
As a rule of thumb, you will want to keep server load below 1. But this isn't necessarily true in all cases. If you watch your server(s) for a while you will start to see what a reasonable load is. This is probably the easiest way to understand it, by just watching it in the real world. That said, how the load average is calculated is actually rather complex, but if you're interested I recommend checking out the following article on how Linux calculates it:
http://www.linuxjournal.com/article/9001
Now back to sendmail. Sendmail can be configured to only queue messages, or to flat out reject messages, when the load average (LA) gets too high. The idea is that this will keep sendmail from taking your whole system down. If it's refusing connections too early, there are two settings you can look at in sendmail.cf:
O QueueLA=8 - load average at which Sendmail queues new messages
O RefuseLA=12 - load average at which Sendmail rejects connections
Googling on the above returned a page with some instructions on how to change these parameters (when using M4 macros) which might be helpful:
http://www.revsys.com/writings/quicktips/sendmail-mc.html
Unfortunately this in now a very common occurrence. It is an automated attack on SSH which is using 'common' usernames to try and break into your system. The message means exactly what it says, it does not mean that you have been hacked, just that someone tried.
Best Answer
As the configuration README states:
confQUEUE_LA QueueLA [varies] Load average at which queue-only function kicks in. Default values is (8 * numproc) where numproc is the number of processors online (if that can be determined).
confREFUSE_LA RefuseLA [varies] Load average at which incoming SMTP connections are refused. Default values is (12 * numproc) where numproc is the number of processors online (if that can be determined).
It is best to set these values "by hand" in sendmail.mc and see what happens.