Read Up on the History of 3D

For much of 3D's history, the trick has been getting the effect of the third dimension without having to do it for real. The early Wing Commander games gave the illusion that you were flying through 3D space, but really they were just scaling sprites up and down.

Ultima Underworld could afford to push these limits because as a role-playing game, it was inherently slower than a shooter, and the audience was more willing to accept the necessary limitations, like the small viewing window. It didn't hurt that while publisher Origin's official motto was 'We Create Worlds', its unofficial credo was 'Your PC Will Cry'. It never did worry about system requirements...