Pixelation is usually done by taking a region of the image, scaling it down and then scaling it back up. It’s like if you open an image in MS Paint and shrink it by 90%, save it, and then scale back to its original size.
The scaling down causes loss of information because there are fewer pixels to display the image. When you scale back up you do not get this information back. It’s also why images look worse the further you zoom in.
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