LCD displays have fixed pixel sizes. Since the fixed pixel size means that there is a specific number of
physical pixels horizontally and vertically on the screen, that number constitutes the "native" resolution. This is important because that is the resolution at which the LCD screen will produce it's optimal image. Think about it this way. On a CRT the pixel sizes can change when you change resolutions. That's not possible on the LCD. Instead it has to use an interpolation method, to produce diagonal lines, for instance. That makes the edges of objects look jagged, or at least more jagged than normal. With some more recent LCD displays this situation has improved for two reasons:
1. The pixels have gotten smaller (with higher native resolutions), resulting in smaller jaggies.
2. The interpolation algorithms have become more sophisticated, making better use of a few geometric tricks and color depth among other things to make interpolated images look smoother.
Interpolation works best when a whole multiple of pixels is being used to produce the image. So, if your native resolution is 1600x1200, then a resolution of 800x600 on that screen will have smoother edges than 1024x768. (The 800x600 resolution setting will use 4 physical pixels to produce each apparent pixel in the image.)
I'm not familiar with the Sony display you mentioned. You should note that the aspect ratio of a 1280x1024 system is different from all of the other standard resolutions in use. That means that none of the other resolutions will be able to use a whole number multiple of pixels to produce a single apparent pixel -- unless you set the system so that the image does not "stretch" to fill the screen. When you run that system at 1600x1200 you will have to "scroll" the desktop to see all of it. That's because the LCD can't use less than a physical pixel to represent an apparent pixel.
I hope my explanation isn't as muddled as my head is at the moment.
- Collin