Hi,
"sigma" refers to the standard deviation of a Gaussian distribution, which is often what we use to describe the noise in astronomical images. If you don't set --sigma, it will be estimated from the image. I would recommend not setting it, unless the automatic estimation is failing. (Can happen for processed JPEG images.) It is in whatever units your image is in (ie, 0 to 255 for JPEG images; ADU for FITS). More likely would be setting the --nsigma value, which sets the detection threshold -- a peak has to be above nsigma * sigma to be accepted as a source.
Like you say, for Astrometry.net to work you probably need about 20 detected sources. If you can *see* stars in your image that aren't detected by the code, then you can think about changing --nsigma, but some images really just don't have that many detected stars, and then Astrometry.net is unlikely to work for those images.
cheers,
dustin