Newly uploaded and set featured images get cropped according to the theme’s current configuration.
Existing images are displayed at their closest existing crop or full size (since they do not have the specific size crops). Unless the source images are already blurry, just cropping them to size will not make them more blurry. However, large images shrunk to fit in smaller size might appear crispier than their 100% zoomed counterparts.
You can configure the theme to disable cropping and display featured images in full all the time (with the downside of using the larger image files).