Fuzzy picture quality

This is a really basic question and I've scrolled the memories but I couldn't find anything. Sometimes when I resize an picture to 100 x 100 pixels, I lose substantial picture quality, causing the icon to seem grainy, like in the example below. The "polaroid" of Depp is alright, but the main picture isn't great.



I'm wondering how I can fix this. Do I have to increase the resolution when I resize? Or does it just seem this way because the icon is too "busy"?

I merged all the layers (there were 5) before I resized and I'm using PSP9 but I've used PSP8 and 7.

Thanks for the help.