The original source may have been in bad shape to begin with. Film can and does deteriorate over time. So the original VHS tape or DVD may have been made from poor film elements. Film restoration didn't start to hit it's stride until the demand for more home video started to increase and people told the studios they wanted better copies for home use.
http://en.wikipedia.org/wiki/Film_preservationFilm restoration issues
Main problems in restoring film
* Dirt, dust
* Scratches, tears
* Color fade, color change
* Excessive film grain - a copy of an existing film has all of the film grain from the original as well as the film grain in the copy
* Missing scenes and sound; censored or edited out for re-release.
* Shrinkage: linear and "across the web" (width), as well as localized puckering around large 1 to 2 perforation film cement splices, most common in silent and very early sound films. Highly shrunken film, 1.5% or higher, must be copied on modified equipment or the film will likely be damaged.
Modern, digital film restoration follows the following steps:
1. Expertly clean the film of dirt and dust.
2. Repair all film tears with clear polyester tape or splicing cement.
3. Scan each frame into a digital file.
4. Restore the film frame by frame by comparing each frame to adjacent frames. This can be done somewhat by computer algorithms with human checking of the result.
1. Fix frame alignment - Fix jitter and weave - the misalignment of adjacent film frames due to movement of film within the sprockets. This corrects the issue where the holes on each side of a frame are distored over time. This causes frames to slightly be off center.
2. Fix color and lighting changes - This corrects flickering and slight color changes from one frame to another due to aging of the film.
3. Restore areas blocked by dirt and dust by using parts of images in other frames.
4. Restore scratches by using parts of images in other frames.
5. Enhance frames by reducing film grain noise. Film foreground/background detail about the same size as the film grain or smaller is blurred or lost in making the film. Comparing a frame with adjacent frames allows detail information to be reconstructed since a given small detail may be split between more film grains from one frame to another.
Modern, photochemical restoration follows roughly the same path:
1. Extensive research is done to determine what version of the film can be restored from the existing material. Often, great pains are taken to search out alternate material in film archives around the World.
2. A comprehensive restoration plan is mapped that allows preservationists to designate elements as "key" elements upon which to base the polarity map for the ensuing photochemical work. Since many alternative elements are actually salvaged from release prints and duplication masters (foreign and domestic), care must be taken to plot the course at which negative, master positive and release print elements arrive back at a common polarity (i.e., negative or positive) for assembly and subsequent printing.
3. Test prints are struck from existing elements to evaluate contrast, resolution, color (if color) and sound quality (if audio element exists).
4. Elements are duplicated using the shortest possible duplication path to minimize analog duplication artifacts, such as the build-up of contrast, grain and loss of resolution.
5. All sources are assembled into a single master restoration element; most often a duplicate negative.
6. From this master restoration element, duplication masters, such as composite fine grain masters, are generated to be used to generate additional printing negatives from which actual release prints can be struck for festival screenings and DVD mastering.