Antialiasing

These images are twice as large as their originals, so the effects are somewhat exaggerated.

Jagged
Aliased - See the jaggies?
 
Smooth
Anti-Aliased - Smoooooth

Here are the same images in their original sizes:

          
 

Here is a piece of the W, blown up to 1200%, so you can see how anti-aliasing works.
Intermediate pixels in a color between the object and its background
fool the eye into thinking that the edge is smooth.

Aliased
Anti-aliased

HOWEVER!

If an image is anti-aliased on a light background, and saved as a gif, you cannot use that same image
on a dark background without getting an irregular, broken-up light outline around it.

smooth on black

Here's why:

Transition pixels take the image from red to white. You would need to create the image over a black background to have the antialiasing transition pixels go from red to black. Or use png.