Let say I wanted to make a level-based game taking place inside a bunker. Would I just make the underlying level geometry as one 3d model including all walls, ceilings and floors, or would I divide it into models for each room, or even for each surface?
The most common practice nowadays is to build it with modular assets, and part of the games build process is to combine static meshes that share a material so it can be rendered more efficiently. This is a oversimplification of a complex topic, and there are far more advanced tools now. Most terrains aren’t even modelled anymore, but generated and sculpted in engine using PCG tooling.
Note, this is mostly for the contemporary AA and AAA games industry.