iCloud & iCloud Photos · iCloud Photos and the Photos library
Why do my photos look low resolution on my Mac with iCloud Photos?
Short answer: With Optimize Mac Storage on, Photos keeps smaller versions on your Mac and downloads the original when you open, zoom, edit or export. Brief blur is normal; choose Download Originals if you want every original locally.
Because with Optimize Mac Storage on, your Mac keeps a smaller version of many photos and fetches the full-resolution original from iCloud when you open, zoom, edit or export it. A moment of blur while it downloads is normal.
If it stays blurry, check your connection and that you're signed in to iCloud. If you'd rather always have originals on the Mac, switch to Download Originals to this Mac in Photos → Settings → iCloud — but that needs much more space.
Storage Studio doesn't change photo quality and doesn't touch your Photos library; this is purely Photos' own setting. See Optimize vs Download Originals.