From here:
http://arduino.cc/en/Guide/ArduinoMini
The 0.1uF capacitor from the reset pin is connected to the RTS pin on the mini USB adaptor. This enables auto-reset when the serial port is opened, meaning you don't have to press the reset button every time you upload new code. If it gives you problems, you can remove it, and press reset every time.
I do not understand how/why the capacitor works in that case.
In AC circuits it makes sense to have capacitors where the charge moves back and forth, but here in a DC circuit I would think of it as "unconnected" / open. Assuming that the RTS pin stays high once a connection has been made I do not understand why the capacitor apparently acts like a connection instead of being unconnected/open.
If I was sending more data than the FTDI chip can relay it would pull RTS low. Wouldn't that reset the Arduino ?