An anonymous reader writes "Two researchers — Johannes Kopf from Microsoft, and Dani Lischinski from The Hebrew University — have successfully created an algorithm that depixelizes and upscales low-resolution 8-bit 'pixel art' into lush vector graphics. The algorithm identifies pixel-level details (original paper — PDF) to accurately shade the new image — but more importantly, the algorithm can create smooth, curved contour lines from only-connected-on-the-diagonal single pixels. At long last, we might be able to play Super Mario Bros. on a big screen without stretching our beloved plumber's pixels to breaking point. You really must look at the sample images."
Scroll down in the paper to see how their technique stacks up against some others, including Adobe's Live Trace.