It's about voltage drop. At a given current, you don't want much more than 1% voltage drop. Wire has so much resistance per foot, the larger the wire, the lower the resistance.
From
this site, 10GA wire has 0.998mOhms per foot. 16GA wire has 4.016mOhms/foot.
At 100A and 2 feet, the 10GA wire will have 0.1996 voltage drop and almost 20w being dissipated on it. At the same 100A, two feet of 16GA wire will have 0.8v dropped, and 80w being dissipated. Yikes; that would be more like a fuse than a wire...
These resistance values are probably for solid conductors, so it'll be a little off, but you get the idea...