When reducing the resolution the game will sometimes increase the setting to be higher quality. This can leade to aa being turned on and other settings resulting in a better picture quality. Characters will appear bigger as the resolution is smaller, what use to be 1 in high is now about 1.15 in high. Thus if you lowered your resolution more you will get bigger characters. However, this limits the field of view as you are now more focused on the characters and not the surroundings.
The quality improvement only occurs if you are maxing out your card at the higher resolution. If you have max setting on at the high resolution and getting 60 fps, you will likely notice a lower quality when decreasing the resolution due to less pixels per inch. If you did not have max settings on at high resolution and you decrease your resolution, you could see an increased quality at the same fps.