Any question answered...

Basically you blow the image up without losing much of the quality, as neighbouring pixels which didn't exist in the original image are created through guessological algorithm. Or something like that.

We'd use a software back in the day when DSLRs had 2.1MP sensors - for example Genuine Fractal or an integrated Image Resize function in PS.

You don't lose quality, but it doesn't create 7MP of extra quality either. (Although, it will result in 7MP of extra file size). It's the same as digital zoom. i.e. pointless.