Interpolation is when an image is increased in file size, without re-scanning, so the extra pixels required have to be invented as there is no reference to the original.
FIGURE 1 If the interpolation is done incorrectly then one of the resulting problems is a stepping effect on diagonal lines (indicated left). Instead of a smooth slope there are clear steps giving a jagged edge. In some parts the steps can also take on an alternating light and dark colour effect, seen at the top of the lefthand example. The righthand example has an extra clue where the image has been previously sharpened, but the white outlines have also become very soft (indicated).
There are ways to interpolate correctly, either with Photoshop or with third party plugins, that can give a reasonable result. But no matter what method is used there comes a point where the image visibly deteriorates and becomes unacceptable.