Digital Quality

Actually, you're pretty close to the answer. If you can have a good quality picture in 1024x768 then it will look even better when you reduce it's size.

Also, it's quite interesting to be able to print BIG photos without have a poor quality.

The 1024x768 resolution that the camera is advertised as is the maximum number of pixels that the camera can take a picture with. This means that at the highest setting, a picture is comprised of 786,432 pixels. This is enough to get a decent print-out of 3x5. However, if you want to get a print-out of 8x11, you will need a picture that is made of at least 1 million pixels. Basically, the more pixels a picture has, the more resolution it is capable of having, and the larger the print out can be without having any appearance of the box-like pixelation.

For a consumer-grade camera, the resolution of the picture, regardless of the size setting, is 72 ppi or 96 ppi. At this resolution, a one million pixel picture fills up the entire monitor, but it appears fuzzy (big in size, but low in resolution). When you print this out, it will be larger than 8x10 inches, but the image is still fuzzy because you have not increase the resolution. Therefore to sharpen the printed image, decrease the printout size to 8x10 and increase the resolution to 300 dpi. This can be done with Photoshop. This is a great program to have, albeit expensive, for those who wants to edit and publish pictures in both the digital (Web) and printed form. It includes color management for both outputs. When you have used Photoshop for a while, you will understand the relationship between the digital and print format, including the ever confusing pixels per inch and dots per inch.

If all you want is to display the picture on the screen, then just decrease the image's size to that of the appropriate size depending on the monitor size and resolution setting. A 300 dpi image and 72 dpi image look the same on the monitor but the former takes up a lot more disk space.