They’ve been using these tricks for years! I remember when Ocarina of Time seemed like a huge kingdom, my imagination filling in the blanks. Later reading that the skybox was just a small texture hovering above the player blew my mind.

You can see it best in Wind Waker. Raise the camera manually to the highest point when sailing and you can just about make out where the sea textures blend into the blue wraparound yet play the game at the default low sailing camera point and you’d never know.