There's no hard-and-fast rule for what size tyre fits (apart from a good 1-2" range) and looks good on a wheel, it depends a lot on the car. Take the beloved-by-many MA61 Supra wheel, 14X7 +8 so it has a decent bit of dish; factory fitment for the MA61 is a 225/60 tyre, and this style looks good under the wide haunches and flared guards of the Supra. Put the same wheels on a KE55 Corolla though, and the tyres look positively balloon-ish - 195 is a much better fitment, with sidewall height to suit (I ran 196/65 for the rally-car look, but that can still be a bit high for some people, and puts the speedo out too)
I for one am not a big fan of the whole stretched-tyre scene, especially when taken to the extreme. A little bit here and there, especially if it is on a smaller car to help tuck the tyre under the guard, can be ok though. What I really hate is stretched tyres fitted to small (like 14") wide wheels on cars like MA61s which have flares especially to take fat tyres (the stretch ends up almost being a continuation of the flare), it makes the car look like it is rolling around on castors rather than actual wheels and tyres
I've also ran 205 tyres on both a 6.5" (which would be way oversized to some people) and 7" wheel (45/16 for the 6.5", 20/17 for the 7"), with, and to be honest you can't really tell the difference in width of the wheel just by looking at the sidewall, even on such a low profile.