Please consider updating the documentation to include something like this, with more prose:
You can find it under Bookmarks => Manage Profiles => Terminal Profiles => <select profile> => Scrollback Lines
It would be best found in here:
http://iterm.sourceforge.net/usage.shtml
It is mentioned in the FAQ, under "My iTerm is too slow." where it then talks about "Avoid using a big scrollback buffer. " That would be a good spot to put this information, also.
Thanks,
Laramie