The Name field is where you may type your name as you desire, with capital letters and spaces. But for system-level tasks, Mac OS X also requires a version of your name that does not contain capital letters or spaces. This is referred to as the "short name" and is entered in the Short Name field. The term "short name" should not be taken literally.
The short name is limited to eight characters in Mac OS X versions 10.0 through 10.1.5. With Mac OS X 10.2 or later, it may be up to 255 characters long.