In the beginning of the 20th century and between the two world wars, during the era of the dreadnoughts and battleships, there was an arm race. So the various powers agreed on a number of battleships to limit the arm race. The definition was made with displacement, because at the time battleships were meant to carry the biggest possible guns, so displacement was kind of proportional. To get around this, they designed battlecruisers. Basically a battleship but with a displacement low enough that it was not limited by treaties.