Because what matters for covering something is not the actual size but the apparent size — the size an object seems to have when seen by our eye. Apparent size depends on the actual size and on the distance.
The Moon is far smaller than the Sun, but it is also enormously closer to us. The two effects cancel almost exactly, so the Moon and the Sun look nearly the same size in our sky. That is why the Moon's disc can just cover the Sun's disc completely.
Sun: about 400 times wider than the Moon
Sun: about 400 times farther from us than the Moon
Apparent size ∝ size ÷ distance → the two ratios come out nearly equal
Activity 12.4 is the proof: your thumb is only about 2 cm wide and your friend's head about 16 cm, yet the thumb hides the head completely from 5 metres away — because the thumb is only about 60 cm from your eye. The Moon is doing exactly what your thumb does.
Did you know? Mercury and Venus are much bigger than the Moon but far more distant, so their apparent sizes are tiny. When Venus passes in front of the Sun it appears only as a black dot — never as an eclipse.