The concept
In simple terms, texel density is the texture resolution you need to apply to your mesh or scene so objects do not look mismatched - either too well defined or too badly defined - especially in relation to each other.
There are general rules of thumb for when to use certain texel densities (for first person view vs. third person, for example), but ultimately as long as you understand the concept and apply the texel density correctly to your own scene, it can vary.
Here are a useful few free resources which explain the concept pretty well:
What is texel density? by Chris Green
All you need to know about texel density by Leonardo Iezzi
Texel Density and other bits of texture theory by Anthony O Donnell
Understanding UVs and texel density by Substance Academy
In practice
There are many plugins and add-on that can be downloaded for Blender, 3dsMax, etc. which can help you calculate and apply the correct texel density.
3dsMax: http://www.scriptspot.com/3ds-max/scripts/texel-density-tool
Blender: https://www.blendernation.com/2020/02/27/blender-add-on-texel-density-checker-free/
Why