This picture shows the comparable sizes of modern digital video signals. Basically the numbers (480/720/1080) represent the number of lines (vertical columns) that the video can carry with it. Now for all practical purposes, lets assume that we can actually see all of those lines that are carried (which we can't, but lets not get into that). Basically those numbers are the dimensions of your resolution. Now look at that picture and look at the smallest size (480i). That picture contains 480 columns of video no matter how big your screen is. So the width of those columns is much bigger on a larger screen, causing blur and distortion. But when put onto 1080, you have more than double the number of columns, cutting their width in half, giving a better picture.
Now you are using S-Video which will out put in what would be just about 440i (not really, but bear with me). Your computer outputs to your monitor in a resolution of about 720p. That is nearly double the number of lines of video available. So by switching to a higher bandwidth cable (DVI or VGA), you can dramatically increase your video resolution, and make it less blurry (or no blur at all)