The terrain data is stored at some specific resolution ie. there is a
height recorded for each square of land N by N feet in size.

good stuff snipped

If I understand you correctly, the increase in terrain resolution comes
from packing more data into memory (more information per pixel) and
redefining the zoom access?

"pixels" and "zooming" are concepts orthogonal to the database resolution, which
is what is claimed to be improved. It has nothing to do with the resolution of
the display screen.