When a transparent PNG image is scaled larger, it may be displayed as a
blurred image.

The attached image transparent3.png is a green square with red dots.
Its alpha values change one by one from left to right with step 1.
transparent4.png is a similar image whose alpha values are floored into
multiples of four.

When transparent3.png is scaled much larger, the displayed image is
blurred.
  (insert-image (create-image "transparent3.png" 'png nil :scale 5))
  =>t ;; blurred dots are displayed
transparent4.png is displayed with square dots.
  (insert-image (create-image "transparent4.png" 'png nil :scale 5))
  =>t ;; square dots are displayed