The default number of undo levels is 50. You can change it by increasing the History States value in Preferences > General.
The reason it appears that you only have one undo state is because the CMD+Z shortcut toggles between Undo and Redo. To undo more than one step, use OPT+CMD+Z (on Windows, ALT+CTRL+Z). That's the shortcut the "Step Backwards" command under the Edit menu. You can also just use the History palette to select a previous state.
If you're not happy with those keyboard shortcuts, you can always change them (make CMD+Z the "Step Backwards" command, for example) by going to Edit > Keyboard Shortcuts.