From Test-Scratch-Wiki
Small Stage Layout is a size option for the stage in the project editor. It lowers the stage's resolution to 240x180 pixels, half of the normal size. It has many beneficial uses for developing a project, such as obtaining a visual sense of the project's progress while having an expanded editing area. This feature is helpful for computers with lower resolutions.
Activation
The small stage layout can be activated through the Edit menu by selecting the "Small stage layout" option, or by pressing the small arrow to the left of the block palette. It is a visible option of the menu without shift-clicking. When this is selected, the stage will shrink and the sprites pane will adjust its width and height to fit.
Uses
When the stage is shrunk to a lower resolution, the scripts area, paint editor, and sound editor expand in width. If one is on a low-resolution monitor, this can provide a larger area to see scripts, draw a sprite, etc. If the project window is not full-screen, small stage layout can be selected so the tools, such as in the paint editor, do not overlap due to a lack of space. Its main purpose is to have more editing room, whereas full screen can be used to test the actual project.