My understanding is:
The ratios are an input to output ratio in a gear system (trans, differential, over or under drive, transfer case). The ratio does not represent the distance traveled by one rotation of a specific size tire.
A function of ratios is power multiplication. Power (in the form of speed torque) must come in with the input shaft. It is either increased or reduced by the ratio. Theoretically, high speed energy input is "converted" to high torque output through 5.56:1 gearing, while torque is "converted" to speed through 1:5.56 gearing. Realistically, there is some friction losses.
The trick is to get the right ratio combination for the speed / power combination you need.
As gribly said: The final drive ratio includes all the gearing from the engine output to the rear drums / brakes. Each gear in the transmission will produce a different final drive ratio, because each gear has a different ratio.
Bigger tires takes more effort to turn. The torque needed to turn a tire is a function of the radius of a tire (straight line center to outer tread distance). The longer the radius, the more torque needed to turn it. You need more power input to turn bigger tires, but the final drive ratio is the same.