Depending on the actual size of your monitor, the display card and the monitor itself will have to do some work to fit the image onto the screen. Trying to display 1280 pixels of image on 960 available pixels will result in some loss of pixels and, consequently, some loss of information. If my display preferences were set to 800 x 600, then fitting 800 pixels into 960 available pixels would leave some gaps to be filled.
The graphics card and monitor deal with this by calculating average colours for each pixel based on the colors of adjacent pixels. This process is called interpolation and can account for the fuzzy look you can get when the display resolution is a bad match for the actual size of the monitor. Generally, though, if the display size is greater than the actual screen size, the resulting reduction makes up for the loss of sharpness in the same way that a poor quality photo looks better at arms length.

click to enlarge

click to enlarge
The square on the left is 2 pixels x 2 pixels (greatly magnified)
The square on the right is the same 2 pixel image enlarged to fit into 3 pixels. The lighter orange area has been interpolated. The black lines have been added to show the original pixel boundaries.