Not sure if anyone has answer this properly, but... dpi stands for Dots per inch, which
specifically refers to print, monitors don't have a dpi. People refer to it as 72dpi simple to show
the amount of pixels per inch of the actual monitor's size, however it doesn't work the same
way as in print.
One important thing to remember is that monitors are back lit, papers are not, the
constant refreshing and far viewing distance makes the monitor appear as sharp, where as
up close it isn't. The same principles apply for color in print vs color on monitor. Of course you
must also factor in that CMYK is a subtractive system, where as RGB is an additive system.
Since we're not talking about color, here is how dpi really works. In photoshop, when you see
dpi in the image settings, that simple refers to how big you can print said image on paper, at
said resolution. 300 dpi would mean that for every inch, you are printing 300 pixels, each pixel
being a single dot. The actual size of the image will be in the first box, the dimensions in pixels,
whatever dpi you set it as, the actual size will not change, that how big the image is. This is
not to say that it doesn't get upsized, most people just set the image to 300dpi when it does not
have enough information so photoshop will interpolate said image to the pixel dimensions so
that it can print at 300dpi. Since there is no real image information, it must be generated by
interpolation, which will look... bad.
So, for a standard 8.5"x11" print @ 300dpi, your image needs to be 2550px x 3300px,
for a standard 11"x17" print @ 300dpi, your image needs to be 3300px x 5100px,
for a 24"x36" print @ 300dpi, your image needs to be 7200px x 10800px. Although you won't need
the poster size @ 300dpi, because you never view it up that close anyways, same as a monitor.
Why print at 300dpi? Very simple, it is at that resolution the human eye cannot distinguish
the dots, try looking at some printed text @ 300dpi very very close and try the same on a monitor,
you will notice that the paper is sharper, you cannot distinguish any imperfections within the
text. Modern monitors have fast enough refresh rates that you can't really call them "not sharp"
as well, but I'm sure you've noticed when you take a picture of a monitor,
you can notice the dots.
Simple put, its because a monitor is not static, while a piece of paper is static.
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For those arguing about what monitor dpi is, its very simple, just divide the resolution by the
physical size of the monitor, and you will get the dpi. As you change the resolution, that dpi changes,
it's very simple, and not really a fixed number.
Pixels are pixels, inches are inches, dpi is just a conversion unit to get from one to the other,
and it changes as the two units its converting changes. Without interpolation, your image is just
X by Y pixels and it will not change, you can downsize it or upsize it, but that information will be
resampled by the program and generated, thus it won't look "good".