Cain is using a fantasy RPG as an example
Setting and then story and system mechanics. The setting should describe the world the game is set in, and what the major areas are. History of the whole world, particularly where you have the game in.
The story is the main acts you are going to go through, Fallout has three acts (Find Water Chip, Stop Mutants, Stop Master), Arcanum has 27 acts. Cain feels the best number is somewhere in between.
Should also detail key characters that move story along, provide most of the main story quests. You may consider some Essential and make them unkillable, in Cain's games he prefers to just consider Essential to mean you have to prepare a plan B if the player kills them (Side NPC steps up, you find their journal, etc.)
Then you go to the system mechanics, which will need many sections and subsections.
Character System Mechanic like attributes skills spells feats backgrounds races flaws, etc. You probably won't have all of those, but you'll have a bunch of them, and you'll need to describe what they are how they're obtained, how they can be raised during the game, expected range, and whether you can respec.
Than you give a mechanical idea of what character construction is, what the player is given to select, do they have points to spend or do they roll, then you consider the exact mechanics of what happens when the player levels up.
Consider all the status effects, some of them could come from perks or hazards in the game. Could easily be 4/5 dozen of them, Cain has had games with over a hundred status effects. Must be exact when describing these and how they interact with other status effects.
Then comes inventory, encumbrance, different equipment slots on the player and NPCs.
That leads into combat, which is going to be a lot. Is it real time, turn based, what is the combat like on a high level, what form does it take (turn based, real time), the rules for hitting, missing, critical hitting. Melee vs. ranged, are the range weapons projectile or hitscan. Have to go into excruciating description. What kind of armor is there, how many armor slots are there.
What creatures are in the game, what kind of abilities do they have, what attacks and status effects could they use.
Then another big section is dialogue, have to explain exactly how it works, how you want it to branch, what restrictions there. Cain personally restricts it to no more than 5 nodes displayed at any one time. How do skills work in dialogue, how NPC reaction affects dialogues.
Now in stealth section, how hiding works, does it work with lighting and/or cover, how NPCs detect you, how does picking locks work, what does a stealth path for a quest look like.
If you have companions, you're going to need a whole section for that, how players get them, how to keep the companions when they leave, how many there are, how many can you have on the same time (Does it depend on skills/abilities/perks?) Do some companions have restrictions, how do they interact with the main quest and what are their personal quests if any.
Economy gets it's own section. Loot, loot tables, vendors, probably want to throw in a crafting section with everything that entails.
Going back to areas in the game, now you consider how big they are, what towns are there, what dungeons do they have. What encounters are guaranteed, what kind of random encounters could you find.
User Experience section can be broken up into three parts. Pre-Game, Out of Game, and In Game.
Pre Game would be anything the player sees before actually playing. Main menu, how that is designed. Consider options such as visuals/audios/accessibility. Some of these you're going to want set before game, others are set during the game (Cain calls this out of game, such as game saving.) Have to be careful because some options apply to every game, others apply the options just to the game currently running.
Than you have to consider all the in game UI. Level up screens, journal screens, inventory screen, all the works. You'll need looting, bartering, local maps, world maps, the notifications the player gets when they are set on fire or damaged.
A few considerations, some of these may need their own sections, maybe you could attach them to the other sections.
PC Vs. NPC. Some attributes may work the same, others work differently. Can NPCs knock out players like players can knock out NPCs? You may not want the player to fly, but maybe you have dragons or other flying enemies and you can control where they can fly. Don't have to worry about a dragon flying into a house, but if you let the player fly that's the first thing you need to consider.
Considerations for mutliplayer. If you have multiplayer, some game features may go, maybe you don't want the turn based option in multiplayer. Maybe in multiplayer people don't make custom characters like they do in single player.
More recently, Cain has begun implementing Design Fallbacks. These are more simplistic designs that can be used instead of your main plan if it turns you lack the time/resources to implement it. They used this several times in Outer Worlds. One of them was grenades, Cain wanted throwing grenades, but they could never get the arcs working right so they went with the Grenade Launcher you see in the game. That caused a throwing skill in the Melee section to be removed.
Fallbacks are important because you can rarely sacrifice something without consequences, i.e they lost grenades, now the throwing skill has to go.
Cain shows the Arcanum design specifications printed out, a meaty 148 pages. There is a digital version, but Cain believes it is still covered under NDA and won't upload it.
Codename for Arcanum was Epic, also what they called the post apoc demo.
A surprising amount of the design specifications actually are the same as the shipped game, there's a map of the game shown at 17:15 and it's pretty close to the final version. Designs are incomplete, lots of interface stuff at the end left unfinished. Was used to get the contract with Sierra, where they were told they had 90 days to make a prototype if they wanted to keep the contract, they used a small subset of that design specification to create the prototype.