Its the size of the total image, for instance, if you take a 12 mp camera and take a picture the image quality is great at 12,000,000pixels (or 1200 pixles like a computer screen) if you take a 8 MP shot(8,000,000), and try to stretch it to a 12MP again 12,000,000, it looks like crap. The reason they get Cameras with such High mega pixels is because they can
1. edit them without it being noticable
2. will fit any size posters, billboards, what have you.
The quality will stay the same if you go down, but never up, try d/l a 800 pixel picture and putting it on your desktop (assuming you have a 1200xXXX amount computer screen)
Hope this helps.

Most of the quality of pictures is lighting, shutter setting, and lens, MP do make a difference only if you want good quality@ a large size.