Both Nikon S3700 and Sony RX100 VII have 20.0 MP resolution sensors but Nikon S3700's sensor is 1/2.3' (6.17 x 4.55 mm ) and Sony RX100 VII's sensor is 1″ (13.2 x 8.8 mm ).
Since Sony RX100 VII's has a larger sensor area with the same resolution, this means that it also has a larger pixel area hence better light collecting capacity for a given aperture compared to Nikon S3700.
Below you can see the S3700 and RX100 VII sensor size comparison.
As seen above, Sony RX100 VII has a 4.1x Larger sensor area than Nikon S3700. Larger sensors give photographer more control on the depth of field and blurry background compared to smaller sensor when shot in same focal length and aperture.