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A volume group is the sum of its physical volumes, divided into fixed-size physical extents — 4 MB by default, which caps a single logical volume's size in older LVM versions. The important discipline is not allocating the entire group: keeping 20 percent free leaves room for snapshots, which need space to hold changed blocks, and for growing volumes under pressure.
LVM capacity
VG size = PV size x PV count; extents = VG MB / extent size; allocatable = VG x (1 - snapshot reserve)
Because snapshots need unallocated space, and growing a filesystem under pressure requires free extents. Thin provisioning helps but still needs a backing pool with headroom.
It sets the allocation granularity and historically limited maximum volume size. Larger extents suit very large volumes; the 4 MB default is fine up to many terabytes on modern LVM.