Ever since video games were first released, graphics have been a huge selling point for popular games. On today's market, most new AAA titles (games with the largest available budget) are focused on improving graphics over previous AAA titles. But improvements in graphics requires a more difficult calculation for the computer hardware. When working with high resolution textures, the hardware need to be able to load in assets faster than ever and since there are physical limitations to how fast these assets can be loaded by the hardware, game designers have to limit their assets size. Without limitations most hardware wouldn't be able to handle the ever growing size of assets. So a game designer is limited by the power of the current hardware when designing assets. However since improvements are made every year on hardware, improvements in graphics quality and the like can also be made but will be limited to the hardware limitations of the future hardware. On a side note, virtual reality graphics were hard to render at a decent resolution a couple of years ago due to hardware limitations. But with the improvement in hardware came also the improvements in resolution and responsiveness of the virtual reality experience. Another aspect of video hardware is also the graphics drivers, compatibility, game engine and much more, but these are the basics of why hardware affects game design.
