In more specific terms - it depends on the original resolution of the picture. If it was a low res picture to begin with OR if you took the "face" out of a bigger picture to make the icon, the process of making the icon lowers the resolution of the picture.
When you dial, the icon enlarges to 5x the original icon size. That is 1/5 the resolution of the original icon. At that res some pix are illegible.
Moral of the story - to get good icon pix on your phone use the phone's camera and take full face pictures so during the icon making process you do as little cropping as possible. Do the same thing on all of them and they will all look great!
