Pretty much if the resolution of an image isn't the same size or larger than the display pixels the image will look bad when scaled to fit the screen. This is true of any operating system. You need to use a high resolution background image.
It happens for any resolution, I am using mainly QHD images, and FHD, 1920X1080 at least.
What is happening, is windows puts the image in a theme folder, where it creates a cache file,
That file is resampled, because the theme wallpaper is stored in RAM, and it is used at windows start-up. To speed up the start-up, windows system resamples the image with the ideea that the resampling will make the differences un-noticeable.
I see the differences.
This also happens with Android. No ideea why, or how to stop it.
Again, on a 1280X720 screen on Android, I am having a QHD image, and a FHD image as background, and it looks badly pixelated.
In windows there were work-arounds, but in Android, I am yet to fiind one. HTC default wallpapers worked like a wonder, in all their detail, but any wallpaper I set from gallery is pixelated.
In windows, the defaul wallpapers are also pixelated.
The average user does not notice because the aliasing and errors are much less in pictures, than in abstract wallpapers, especially in smoke effect.