There's no exact legal definition of a small craft; however, small craft advisories are generally intended for vessels less than 65 feet in length OR for any vessel likely to be adversely impacted by the weather conditions expected with a Small Craft Advisory.
Similar to the exact definition of a small craft, small craft advisories vary from location to location. Generally, they are posted when winds are expected to range from 28 to 38 mph or waves of 5 to 7'. However, the wind range may drop as low as 24 mph for harbors or bays, and waves as low as 4'. There are other local variations which forecasters take into effect.
Practically, this sailor will tell you the go-no go decision depends or should depend upon your experience as a skipper, the exact capabilities of your boat and the fortitude (or comfort level) of your passengers.