Stand up, reach high with your arms and try to touch the ceiling! 

If you are tall enough and if the roof is low, you’ll be able to touch it; or at least you will if you stretch. This is like a stretch goal.   Of course, if you have a high roof, you’ll need a chair. And if the ceiling were really high, you’d need two chairs, which might start to wobble, and then you’d really have a stretch goal. Add more chairs and the cord that connects you to reality would break. 

Stretch goals are similar. It’s the skill of a maestro to pitch the goal at just the right level to combine 'attainable' with 'ambitious' and 'audacious'. When the Toyota Prius was being developed, the bar was raised more than once during the project. The project end date was brought forward by a year on a four year project. The target for engine power was doubled. 

It must have been difficult for the team to believe in these stretch targets. But the sponsor was able to say “I know you can do it, and if you don’t, it will be my responsibility!”