Resolution and Aspect Ratio

Morrowind's maximum natively-supported resolution is 1600 × 1200, and does not support any aspect ratios other than 4:3. This can be a problem for players using high-end PCs, where a poorly-cooled processor may overheat during extended play at 240 frames-per-second (Morrowind's default maximum), and players who use widescreen monitors. The FPS Optimizer allows the exact resolution to be tweaked, as well as several other factors, such as allowing view distance and AI distance to be increased beyond the default limit. Most widescreen monitors are in a 16:10 aspect ratio, the most common resolutions today being 1440 x 900 and 1680 x 1050. If your view looks streched at this resolution, try searching for your monitor online or looking through the paperwork which came with it.
The Morrowind FPS Optimizer can also be used to improve performance on PCs which have difficulty running Morrowind even at low settings.
Morrowind Graphics Extender and MGE XE are also excellent utilities for higher-level PCs that allow one to change the screen resolution easily, as well as optionally implementing shader on textures, and making the water more like oblivion's. They are most notable for distant land features. Both MGE versions require a fairly fast computer to take advantage of most of these features.
You can also set any custom resolution by hand:
Press Windows+R on keyboard, then type regedit in the box that opens. Locate the key HKEY_LOCAL_MACHINE\SOFTWARE\Bethesda Softworks\Morrowind (for 64-bit Windows system, locate HKEY_CURRENT_USER\SOFTWARE\Wow6432Node\Bethesda Softworks\Morrowind). On the right pane, you will see several numerical values. Double-click on "Screen Height" and "Screen Width" and set them to values you wish to use (e.g. 900 and 1440, respectively).