for some theory on wire sizing and terminal contacts you can look to the National Electrical Code (NFPA 70).
When wire is attached to a ring terminal, the goal is maximum conductivity. You can solder the wire to the ring terminal for better conductivity in car audio but that isn't done in commercial wiring, and we move a lot of power. Consider that DC current is simply the movement of electrons from one valence band to another (for more about valence bands and the materials that are good conductors, consult the periodic table of elements). So at every connection you are trying to maximize the ability for electrons to move from the wire strands to the connector. Compression-fit connectors are very good at achieving this.
NEC also recognizes that the connector itself limits the amount of current you can move through a wire. So the tables are based on three different connector types.
60 deg. C is based on a set screw connection (shove bare wire in and tighten a screw to hold it).
75 deg. C is based on a compression lug with one bolt hole.
90 deg. C is based on a compression lug with two bolt holes (larger/longer).
You may have already guess that the reason they rate on temperature is because NEC cares most about preventing failure. All of the ampacity tables are based on temperature of the wire and temperature of the conductors.
The second reason we increase wire size is due to voltage drop. Voltage drop happens because all wire has resistance per linear foot. Over long distances, the relationship between current and resistance results in a drop in voltage at the end of the wire.
We increase wire size to compensate for temperature and voltage drop. We can run parallel sets or increase wire size. At a certain point it because difficult to work with larger wires. I prefer routing a pair of 4 awg wires over one 1/0 wire.