A laser is a focused beam of light. The more powerful the laser, the more focused it remains at longer distances.
Distos are a Class 2 laser, so not very powerful (which makes them safe to use around a crowded job site). As you've seen, the "dot" can get pretty big at long distances -- like the size of a plate when you get out to the maximum range.
The accuracy of a disto at long distances has more to do with the technology we have developed to measure the return signal of the laser than with the strength of the laser itself. An accurate measurement can be ascertained from a relatively weak return signal.
At longer distances, how reflective your target is will impact your ability to get a reading from that big laser dot. For example, if the 358 sign in this video were black instead of white, we probably would have gotten a 255 error.