This draw distance.
http://en.wikipedia.org/wiki/Draw_distance
It also has this to say about Wind Waker in particular so I guess it might be a technical issue.
"The Legend of Zelda: The Wind Waker uses a variant of the level of detail programming mentioned above. The game overworld is divided into 49 squares. Each square has an island inside of it; the distance between the island and the borders of the square are considerable. Everything within a square is loaded when entered, including all models used in close-up views and animations. Utilizing the telescope item, one can see just how detailed even far away areas are. However, textures are not displayed; they are faded in as one gets closer to the square's island-this may actually be an aesthetic effect and not to free up system resources. Islands outside of the current square are less detailed-however, these far-away island models do not degenerate any further than that, even though some of these islands can be seen from everywhere else in the overworld. In both indoor and outdoor areas, there is no distance fog-however, there are some areas where "distance" fog is used as an atmospheric effect. As a consequence to the developers' excessive attention to detail, however, some areas of the game have lower framerates due to the large amount of enemies on screen"