Yeah, and people custom designed screens for each resolution. It was a different world. You could never take a 640x480 VGA game and play it in 320x200.
Yes, you could -- and people often did if they got better performance out of 320x200. When SVGA cards became widely available, multiple resolution support became a hallmark of even some of the DOS games of the day. Especially 3D ones, but I remember being able to play Jazz Jackrabbit 2 (a 2D platformer, and a Windows DirectX game) at 320x200 or 640x480.
I don't recall any web browsers scaling images or other UI elements based on that, though. Everything assumed 72 or 96 DPI (depending on Mac or Windows), or just showed images at a 1:1 pixel ratio.
The widespread idea of actually serving different images to devices with different DPIs is fairly new.
we’re right in the transition period of switching to higher pixel density devices, until we completely switch over to infinite scalable graphics with small file sizes only it will still take some time, but maybe not too long :) and in the very near future we may focus on hi-res graphics only without the need to worry about standard-resolution images anymore.