On some particular streams ( MPEG 4, DivX, Xvid, Sorenson, etc.), some additional image filtering can be applied to the video before display, improving its quality in some cases. The discard method is a less resource consuming alternative, although its results may be slightly compromised. The Blend methods gives the best results in most cases.
Deinterlacement can be enabled in the Video menu, Deinterlacement menu item.
VLC is able to deinterlace a video stream using different deinterlacement methods.