ripping - taking bits of data off of a disc (DVD or BR)
transcoding - converting from one video/audio format to another (i.e. - MPEG2 to H264)
scaling - changing the resolution of a video
In your case you have a DVD and likely an HDTV that does 1080p. The DVD is at best 480p in the MPEG2 video format. If you transcode the video to H264, it will take less space given the nature of H264 being better at compression. You could also upscale the video at that point, but it would take more disk space and not look any better than if you let the video card to the upscaling as you played back the file.
Chanced are you ahve your video card set to output @ your TVs highest resolution (1080p in this case). So, whenever you play anything that is not 1080p, your video will upscale it to that resolution (quite well I might add).