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VHS quality is typically 240 lines, and DVD quality is 480 lines (both interlace). I have a 52" HDTV, and a VHS movie would look horrible on it, although i'm guessing as I've never tried. Also with DVDs there is no need to rewind, and you can easily skip to your favorite section of the movie.
I can't wait until HD-DVDs come out. Should offer resolutions up to 1080 lines (progressive scan even!)
INTERLACE VS. PROGRESSIVE SCAN:
Standard NTSC TV broadcasts (incl. cable television), VCR, DVD and laserdisc signals are sent in an "Interlaced Scan" format. A TV screen first draws the image's odd lines, one at a time sequentially from top to bottom (which takes 1/60 of a second), and then fills in the even lines (taking another 1/60 of a second). That is, the full picture (top to bottom) is first drawn with half its information hollowed out, and then the other half is filled in -- the entire process taking 1/30 of a second.
A newer and superior scanning method called "Progressive" permits the entire picture to be drawn sequentially from top to bottom without the odd/even interlacing.
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