Logistics also come into play here. Coordinating a large number of people and making them do precisely what you want is difficult to achieve. Other factors, such "too many chiefs, not enough indians" scenarios could also hinder the effectiveness of an army.

There's a similar scenario in Captain America movie.
the Captain gets in with his small detachment. Even though he is technically part of the army, they are 150km inside of the enemy lines, fighting a different enemy for different reasons.
Obviously, being undercover plays a big part in smaller teams. The idea is that you are a commando so to speak. Resource management comes into play.
This is why I don't quite get the rpgs that employ more than 5 or so characters (who says 10+?)

What was the saying, "A dagger in the dark is worth a thousand swords at dawn?"

That's probably the most directly applicable explanation to most RPGs, and I've seen it mentioned a few times in the thread already. A small group can slip into the big bad's palace and remove some vital organs secretly where a full scale army would have to force their way through his army.

The problem with this is that few RPGs I've played actually portrayed it that way. In Final Fantasy VIII for example, Squall's little team literally destroyed armies by themselves. Although, by the end they were pretty much all that was left to fight the actual big bad, so there was no army to do it in their stead. Regardless, most other RPGs I've played are a similar story. Fable, Dragon Age, Fallout, Deus Ex and many others have actual armies or similar groups who engage the big bad (or could), but the player is the one who actually kills the big bad.

It's all related to the "specialness" of the main characters, and if you think about it too much, it can be jarring. In Fable for example, the entire Hero Guild tries to stop Jack of Blades, but in the end, only you can fight past the endless hordes of jackal monsters to best him in single combat. I find it hard to believe that 3 or 4 other high ranking guild members didn't just beat him into a pulp.

It's a reasonable departure from reality for gaming's sake though. Sometimes players just do want to feel like they can take on armies and win. For me though, I prefer a little justification for this sort of thing (such as being an actual god on Earth, or having state of the art nanotech augmentations).

By the way, it's somewhat related to the topic at hand, so I highly recommend you check out Limyaael's Fantasy Rants (Google it, she has these in several places by now). She explains a lot of things that you might want to ponder or avoid when plotting books (but it's mostly applicable to games too). In particular she takes a stab at how "speshul" characters get on her nerves. I agree with her on most things. If you want a special character who is able to do those sorts of things, justify it! Are they expertly trained soldiers who can sneak into the main villain's lair and stab him in the duodenum, or are they just the chosen from the ancient prophesy who can mysteriously absorb 100 arrows to the face and keep running?

My idea is that in most RPG's the last boss has an attack that hits everyone like an AoE attack. It could be their signature move or not, but it usually does MASSIVE damage to even our chosen heroes. An army has numbers but they would have to invade a stronghold to even get near the boss. The thing is, your character as a level one is as strong as a mook, and the boss has an AoE attack. No matter what numbers you have, the boss can wipe you all out with that one attack that he can do. Also, he usually has a magical seal or something that only our heroes can break.

In military theory it's actually possible for 1 person to destroy an army of any size. This is because one's total capacity isn't just measured in brute manpower, it's also measured in quality of action, level of technology, logistical upkeep, and more.

Why not Sin? Because Sin was a big, dumb whale with one effed up signature.