What problem does this feature solve?

Vue 2.7 does not export types of built-in components like Transition and TransitionGroup (In Vue 3 they are exported via @vue/runtime-dom). As a consequence, users cannot get intellisense and type check with @vue/language-tools. Furthermore, VSCode will show warning if vueCompilerOptions.jsxTemplates is turned on in tsconfig.

Ref: vuejs/language-tools#2540

What does the proposed API look like?

Line 76
https://www.unpkg.com/browse/@vue/runtime-dom@3.2.47/dist/runtime-dom.d.ts