the vga connection is analog, the LCD is digital, so basically, your video card converts the computer's digital signal into analog for the vga.. then the ADC of the LCD converts the analog back to digital for the display...
it can be as bad as a highly compressed jpeg because of the loss of data when going from digital to analog to digital... on better LCDs, this is fine, not perfect, but on bad LCDs, it sucks.
DVI is a digital interface, it'd be best.