I can partially answer this for you. When I’ve used the feature, the hotspot remained on if the device using your signal is periodically accessing the net. If there is a period of time that the device is not accessing the web, the host device disconnects. Other than power saving measures (assuming battery operation) I don’t know why it does this. When I’ve streamed music this way, I never was disconnected from the host device. Sorry I can’t be more specific.
I think the limitations of your hotspot would be set by your cellular carrier. I use my hotspot for most of the day nonstop and it is just fine. I also agree with djwindsor that if you aren’t actively using it then perhaps it would disconnect to save power. When I’m using my hotspot, I leave my phone charging. As it seems to be a huge battery drain.