(adj.) (1) Describes an image in which individual pixels are apparent to the naked eye. Typically, the separate square pixels in bitmapped images such as GIFs do not appear individually. When the image is displayed too large or at a low resolution the image becomes pixelated (this is sometimes done purposely for special effect).
(2) Describes an image that has been converted from print to a digitized image, such as a GIF.
The term should not be confused with pixilated, which means whimsical and bemused.