Ever since I started playing The Elder Scrolls franchise, I've always had one wonder in the back of my mind:

As far as the population of villages, towns, cities, provinces, and the whole of Tamriel and Nirn go, are we, as playable characters in a game world that is limited by real world game development technology, meant to suspend our disbelief at the populations that we see in-game?

For example, as far as lore goes, is the Imperial City actually a city in which thousands of people live that is far bigger than what Bethesda can make it with current technology? Or in terms of lore, is the Imperial City actually as big as we see with the same amount of people we can meet in-game?

I always find it odd reading about battles in the past via the various books, imagining huge armies clashing, then I realize that even if the entire Cyrodillic province took up arms, it would only amount to an army of a few hundred.

So to simplify everything: are the viewable populations/sizes in TES games just a suspension of disbelief and the real sizes/populations are actually larger in the "real" game world?

It's certainly the case that the lore version of Tamriel is much larger than the representation we see in-game.