It's somewhat fluffy, as marketing fluff goes. The thing to understand is that home video equipment always is going to rescale images to the native resolution of your display; if it didn't, you'd wind up with a tiny 480-line picture in the middle (or the corner) of your 1080-line display. If it didn't, you'd wind up with material with non-square pixels in the recording being rendered incorrectly on displays with square pixels, and vice versa. It would all be a mess, and rescaling (up or down, as the source and display demand) is what fixes that.
Now, all rescaling is not equal. A really good job of upscaling a 480p signal to 1080p, for example, is going to involve building the added lines in in such a way as to prevent a lot of stair-stepping in the image, where a quick-and-dirty upscale might not do that. A bad job of scaling may introduce artifacts that a better job would not. But to say that something is "upscaled" in itself says nothing other than that the image has been rescaled--it doesn't tell us whether the job has been done well. Consider, along similar lines, deinterlacing--I always liked DVD players with the Faroudja deinterlacing chip because they simply did a better job, and a bit of time with two DVD players (one Faroudja, one not) and a pair of identical DVDs, looking at individual frames, can demonstrate that very plainly.
What upscaling will not do--whether it is done well, poorly, or anywhere in between--is put information back into a recording that didn't make it into the recording in the first place. When a DVD is mastered, there are 480 lines; no upscale can actually recover the resolution that was lost when the DVD was made from the original film. At best, upscaling simply does a really good job of preventing you from being aware of the lower resolution of the original--by limiting stairstepping and scaling artifacts, that sort of thing.
I am certain there are exceptions to what I'm about to say; but in my experience, it has always been the case that the scaling circuits in my displays have done a better job than the scaling circuits in my DVD players. Consequently, the picture doesn't merely look "just as good" coming out of the player at 480p as it would coming out 1080p--it actually looks BETTER (on the equipment I have used) coming out of the player at 480p (though, admittedly, the differences are subtle and unless you like to spend a lot of time staring at freeze-frame images, sometimes it's just about identical).
Bear in mind, too, that one problem with upscaling at the player is that the display may need to rescale again. For example, if you've got a plasma with a 768 line panel, and you play a 480-line DVD with its output at 1080 lines, you're rescaling twice rather than once, and this is never a good thing. Your player takes the DVD, rescales it to 1080 lines, and sends it to your display, which now rescales that signal back down to 768. Scaling twice like this is NEVER going to be as good as simply sending the signal at 480 lines and letting the display scale it once.
What I have learned about the consumer a/v market is that we are all, unfortunately, prone to be a bit resolution-happy. We assume that more lines means better picture; but whether more lines means better picture depends entirely on how those lines got there.
Kurt
Blue Jeans Cable