Short answer is 85th percentile travel speed.
Typically, to post a regulatory speed limit sign a speed study is required to be performed. This includes collecting field data at a time and in a way that no significant change in driver behavior is expected. From the data, 85th percentile speed is established, that is, the speed at which 85% of the drivers are driving. This speed (rounded down to the nearest 5 mph) is then used to determine the speed limit for a given roadway segment. Having said this, there are some restrictions on having a certain range of speed limits on a particular type of a roadway. For example, on an interstate maximum speed limit can only be 70 mph (it is 75 mph in some states but the state law madates that). The speed limit on a freeway passing thru an urban section is in the range of 55-65 mph. A typical 4-lane divided highway with a greater signal spacing (say one signal for every 2 miles or more) can expect to see 45-55 mph. In a residential neighborhood you can expect to see speed limits not greater than 30 mph.
Just like driving at a higher speed is dangerous, posting a lower speed limit is not considered safe. In fact, the residents complain all the time to reduce the speed limit in their area to 15-20 mph. If a speed study doesn't support this then nothing can be done. Of course, there can be enforcement which is a different thing altogether.
If you feel that speed limit on a particular segment is too low then write a letter to the City/County Traffic department and have them do a speed study or if you have an access to a radar gun then present the data.
I am sure that I have still left some points uncovered, if there are suggestions or corrections then please comment.