De-interlacing is a a bit difficult to explain. Honestly I cant see why they still use interlaced video on digital TV.
OK, look at it like this, on a PC when you play a normal video clip like an .mpg file or an .avi file, that is progressive video, meaning that once one frame has been rendered and displayed for its set amount of time, the next one is loaded and displayed.
Interlaced video doesn't work like that. This method renders one frame on half of the scan lines (every other line) on your TV and then the lines in-between on its next pass. Then it renders the next frame on the first half and then the 2nd half on its next pass. This means that 2 frames are displayed at the same time for a certain amount of time as the screen phosphores don't dim instantaneously.
De-interlacing video incorrectly can leave video with a strange effect that causes moving objects in the video to become 'frayed' or 'uneven' while in motion.
I now wait to incur the wrath of those that know better.