Every Photoshop filter does this wrong too.
If I defocus my vision, kind of like when looking at those old "MagicEye" 3D-like images, I can see the words pretty well in the full-size...
In the full-size there's a bunch of high-frequency noise (like building windows) interfering, but that's necessarily lost in the down-scaling, and now the low-frequency information forming the name is clearly visible.
I dont think its that nobody knows, just that it doesn't matter too much and you can resize things much more efficiently with the incorrect algorithm (especially jpgs).
I'm also doubtful that this is responsible for the effect