Dave Plummer created a notepad application called Tiny Retro Pad, which is 2,686 bytes in size, contrasting with larger modern software. The application mimics the original Microsoft Notepad without contemporary features. Plummer emphasizes the importance of working within constraints, recalling a time when developers had to focus on efficiency due to hardware limitations. He utilized existing resources within the Windows ecosystem to maintain the compactness and functionality of Tiny Retro Pad.