Native Google contacts app uses a strangely lower resolution (96x96px).

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REMEMBER TO REBOOT THE PHONE AFTER APPLY PHOTOS
USING ROOT MODE
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This was normal in the firsts Android versions.

The new phones includes a large amount of memory and a large screens, and also, the new Android version (Ice Cream Sandwitch) predisposes to a better user experience.

But, by default, the contact photos stored in Android 4.0 uses the older resolution (96x96px), and the photo contacts appears pixelated.

With this app you can make a bulk update of your contact photos to a increased resolution (256x256px) that's shows much better in your new devices.

Also, in older devices, that aren't running ICS, the app allows to make a bulk photo contacts update and increase the resolution to the device max supported size.

Finally, if you have rooted your device, you can increase the size of the contact photos to 400x400px (or more). That sounds good in devices with a large screen, like Galaxy Note.

Instructions

1) Place the desired contact photos (in PNG or JPG format) in a folder of your sdcard. I recommend to use square photos.
2) Open the app
3) Click settings and configure the sources folder to the stored photos folder
4) Go main window in the app
5) Select the photos that you want to update
6) Click the update photos button (the photos was automatically resized to the max resolution supported by the device).

* If you want to use photos greater than the maximum supported device size, you need to be rooted. If you're rooted, go
settings, check the "Use HD photos" checkbox then apply the desired photos.

Please, if you have troubles or issues, contact with the developers via email or at the XDA thread.