Michael gives a great analysis on the visual aspects of the original Punch-Out!! on NES and how they relate to player experience. So that's why Little Mac is so little!

Punch-Out!!, the classic NES game, has a rather clear narrative theme. The player is the underdog.
It's the classic sort of David-vs.-Goliath story -- someone small can defeat someone that is much larger. But it also shares another theme with the Biblical tale: Intelligence trumps physical strength.
What is interesting about this concept is how the entire presentation of Punch-Out!! is based around reiterating it. Nearly every visual aspect of the game is about making the player feel small and making the player’s opponents feel larger than life.
This is not just due to the size of Little Mac’s sprite compared to the sprite of the other boxers. It also shows in the amount of space they are able to move in. The visual language, along with the game-design decisions for Little Mac’s movement, are about making players feel confined -- almost claustrophobically so -- in order to make them feel smaller and weaker compared to their opponents.
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