Even though oblivion and skyrim is significantly bigger neither of their worlds feel as interesting, real or as big as morrowind.
A big part of that is in those games you can just click anywhere in the map you’ve already been and be there in a second. The quest markers don’t do the player any favors either.
Morrowind is equally ridiculous and grounded at the same time. On one hand, you can come up with spells or enchantments that will turn your character into a god. On the other hand, you have to pay attention to quest givers and follow directions like you would in real life. You have to keep your eyes peeled and on the way you’ll run into new things
It’s true that is a big part of what makes those different. Truth is initially it’s a design shift Bethsoft made out of convenience for themselves, not for the players.
They explained why they did it like that on Oblivion. Basically, while a lot more immersive, Morrowind’s actual quest directions were kind of pain during development. Regularly, a quest objective would be adjusted and moved somewhere else, and they had to track down all related dialogues and logs to correct them. In fact, a few quest logs still have incorrect informations in the final game (e.g. west instead of east!).
The problem was made a lot worse with Oblivion since all dialogues now had voice acting. It was not possible for them to record voice lines again when they changed stuff, and I guess even if they got it right the first time, how many more lines would just be “follow that road, turn there, second door to your right” whatever? Oblivion was already an incredible feat of voiced dialogue back then, this is surely one of the corners they had to cut (in general, dialogue was made a lot simpler than it was in Morrowind).
For better or worse, that’s the real reason for the compass and quest markers.