What is the reason of Error 'A workflow or approval field update caused an error' when saving a record in Salesforce?

This error can occur if there is a workflow or approval process that does a field update and that update violates any field data type constraints.

Example:

Let us say we have a text field with length as 5 and the workflow field update tries to update with a value greater than 5, then you will get this error.

The resolution would be to make sure that update done by the workflow or approval process doesn't violate any field data type constraints. In the example above, the workflow field update should be modified to update with a value lower or equal to 5 characters.

Increase the length of the "Field to Update" field to accept the new value.