Gaming

You can absolutely do that. You can also fit 16 frames of the Xbox 360 game into a single frame of the Xbox Series X game.

Sometimes people forget how much bigger a 4K target is compared to a 720p image, so I added a bit of a visual aid below. Those two screenshots are to scale, displayed at the native resolutions of their respective platforms. Just keep in mind that the big one is from a 1440p 21:9 monitor, so on a 4K TV the picture would have two of those stacked on top of each other.

It's good that this is smaller, because If you squint you can also notice the Xbox 360 game is extremely blurry and looks like it's in black and white. That's because it is. The 360 had 512megs of ram, to share between the CPU and the GPU. The Xbox Series X has 16 gigs, so 32 times more, and it's running a cool 300 times faster. 360 games were compressing textures within an inch of their lives to fit them into that tiny slab of memory, stripping color data among other things.

Computers are not magic. If you want to draw 15 million pixels of a wall and not have it look like soup you need data for each of those pixels. If you want that data to fit in less space you have to either spend resources compressing and decompressing it or you need more storage to put it in. Or you can draw it procedurally, I guess, but then you're back to the performance problem.

On the other thing, it's not "just buy more storage, brah", it's that storage has to ramp linearly with memory. If you are trying to build huge worlds running at hundreds of frames and streaming data at gigabytes per second out of a SSD you're going to need to put those assets somewhere. The problem isn't (just) that games are big, it's that the ability to move those big assets has grown a bit faster than the ability to make cheaper, faster storage for the same price.

Games aren't big because developers are lazy, they're big because physics and engineering are hard and not every piece of technology improves at the same rate. But hey, on the plus side, storage HAS gotten cheaper. By the end of its life the PS3 was shipping 500 GB. The PS5 and Xbox Series ship 32 times more ram but only 1.5 to 2x more storage because storage is where everybody is skimping to contain costs. That's not commensurate with the increase of visual fidelity or asset size, but at least you can add more for relatively little money, especially on PC.

EDIT: Sorry, this client didn't like the picture going in. Link to an example below from a random image hosting site. Follow it at your peril, I make no claims about its safety.
https://ibb.co/Ss7RfzW