The settings in this dialog allow you to control the appearance of the layer in two ways:
The raster cell size you specify on the Raster Resolution area of the dialog box controls the spatial resolution of the content added. The cell size represents the area covered on the ground and represented by a single cell. A higher spatial resolution implies that there are more pixels per unit area; therefore, the graphic on the left represents a higher spatial resolution than the graphic on the right.
Spatial resolution refers to the dimension of the cell size representing the area covered on the ground. Therefore, if the area covered by a cell is 5 x 5 meters, the resolution is 5 meters. The higher the resolution of a raster, the smaller the cell size and, thus, the greater the detail. This is the opposite of scale. The smaller the scale, the less detail shown. For example, an orthophotograph displayed at a scale of 1:2,000 shows more details (appears zoomed in) than one displayed at a scale of 1:24,000 (appears zoomed out). However, if this same orthophoto has a cell size of 5 meters, the resolution will remain the same no matter what scale it's displayed at, since the physical cell size (the area covered on the ground and represented by a single cell) does not change.
Below, the scale of the image on the left (1:50,000) is smaller than the scale of the image on the right (1:2,500); however, the spatial resolution (cell size) of the data is the same.
Below, the spatial resolution of the data used in the image on the left is lower than the spatial resolution of the data used in the image on the right. This means the cell size of the data in the left image is larger than that of the data in the right image; however, the scale at which each is displayed is the same.