One of my major gripes with the JS/TS ecosystem is that "explanations" are sorely lacking. See https://www.typescriptlang.org/tsconfig for the relevant documentation for tsconfig files. Tutorials are on the page, how-to guides abound on the wider internet (like the OP), and the linked TSConfig Reference and JSON Schema (used in code completion in IDEs) are together absolutely massive.
But an explanation is missing! There is no official documentation about how different options interact to say: as I'm walking a file tree as the Typescript compiler, this is how I will interpret a certain file I encounter, what will be outputted, and how that will be interpreted by bundlers and browsers, especially in an ESM world.
https://medium.com/extra-credit-by-guild/tsconfig-json-demys... is in the right direction, but outdated as ESM has become much more popular in the past 3 years, and still organized by option (so it's already somewhat in the "reference" world).
IMO even independent of documentation, the industry's move to ESM is problematic: https://gist.github.com/joepie91/bca2fda868c1e8b2c2caf76af7d... describes many of the issues. But they're certainly exacerbated by good explanation-style documentation that helps people understand how ESM works under the hood!