Resolution vs Compression
Resolution or Size. Camera resolution refers to the dimensional size of an image, which tells us the total number of pixels in the image. Resizing a photo changes the dimensions (width and height). In simple resizing (like HTML resizing), every nth pixel is kept and all the ones in between are tossed out. In smart resizing, every nth pixel is kept, but it's color may be changed to the average of all the tossed out ones.
or the difference between
Resizing and Compressing
Compression. Compression affects the way the pixels are stored, and thus affects the size of an image's file, but not its dimensions or total number of pixels. To simplify immensely, in a bitmap file, every pixel is represented by a digit in a file, like this line of red and orange pixels:
So BMP bitmap files are pure pixels with no compression. JPG and GIF are compression schemes.
If you have a whole lot of pixels in a line that are the same color, then instead of storing each digit, you can use a compression shortcut to say how many of each color are in a single run. The line above would be compressed to this:
6xR, 1xO, 8xR
You can increase the compression by removing the number of colors that are used; and if two neighboring colors are very similar, making them alike will make the one-color run longer. So we could further compress the line above by converting the orange to red and using this shorter representation.
As you can see, All the pixels are still represented, but adding more compression will make the file smaller, and it will degrade the image. You can also see from the example that solid backgrounds give longer runs of one color (smaller files) and that extremely busy photos can't be fully compressed because nearest-neighbor colors may not be close enough color-matches to blend into a longer run.
How does this relate to eBay? eBay compresses images to 79% jpeg quality. If you give them a photo with lower quality (higher compression), when they recompress it again, the overall quality will be worse. You will need to give them photos that are either a lot larger or a lot higher quality, to allow them plenty of room to degrade the photo. Since busy and colorful photos can't be compressed very well, they tend to fare better under eBay's compression and worse on resizing.
When eBay says to shoot at the highest resolution and then resize your photo, they must be assuming that your camera is storing the photos with a lot of compression. I, for one, wouldn't load up my computer with all those extra pixels (you can use up hard drive space very quickly). My camera (fuji A205) stores photos on the camera using only a tiny amount of compression (95% jpeg quality), so I can use my camera's lowest size setting (640x480) and upload directly to eBay. There is plenty of room for eBay to shrink it from 640 down to 400 and to compress it from 95% to 79% quality. Other cameras may have different quality settings at the different sizes, so I can't comment on them.