Resolution relates directly to how many distinct pixels need to be shown to you. The larger the resolution, the more fine-grained all the details will be on your screen, because pixels will each be a smaller part of the overall image. Smaller resolution images showed on larger screens get blurry, since your computer uses some sort of approximation to guess at the intermediary pixels – often just an average of the neighbouring known pixels.
More pixels means more effort for your GPU and so more time per frame, which means it can do less frames per second.
You know when you get a small image and try to stretch it out to fit your document and it goes all blurry/pixelated? That is similar to if you set your resolution scale below 100%.
Setting a lower resolution scale (<100%) will render that game at a lower resolution and then fit it to your screen. Your performance will increase as you reduce this since the rendering requirements decrease for your GPU. Depending on the game, art style, your monitor – you may not notice a difference in picture quality.
Instead of rendering the game at full resolution, it renders it at a lower resolution. Then it blows it up back to full resolution. Since the lower resolution render has fewer pixels, there are holes it needs to fill. It uses an algorithm to guess what those pixels should be and fills them in.
End result, the game looks like it’s full resolution even though some of the pixels are just guesses. Since the algorithm for guessing the pixels is wayyyy easier than actually rendering them, you get increased performance. Depending on the guessing algorithm and the difference in resolution, it can be difficult to tell the difference.
Resolution scaling is how much the video is stretched out to fit your screen. If you set the game to 720p (1280×720) but your monitor is 1080p (1920×1080) then the video will be stretched to 225% its original size to fill your screen. You might not notice much of a difference depending how close you are to your screen and how much detail is in the game but your computer is drawing less than half as many pixels than it would if it were running at full 1080p resolution so your FPS will be much higher.
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