You make a 3D model for example,
this is the main car with all the details, its mainly called the LOD_A,
Level Of Distance, so the A model is the closest to the camera at all times,
usually within 15 meters the A will be used,
but then to get performance ingame, we create a B/C/D LOD Level of Distance model,
these have less geometry,
less textures/shaders and settings, which in turn gives massive boosts of performance
the B is usually set to around 15-45 meters distance, C 45-225 or depending on the quality you can play around with it, and the D set to around 225-1500 to 2000 meters again depending on whats required or preferred,
but they require quite some attention to take away the geometry and keep the car smooth,
extra textures like the cockpits for example so we create a COCKPIT_LR texture
hope that explains some, so basically we are making 4 cars not 1