If you just upscale like you said, then you win nothing. The image will actually even look blockier on a higher-resolution screen because of there being less distance between pixels.
The trick is in blending (interpolating) between pixels, but do so in a smart manner.
The simple method is to do linear interpolation, I.e. just let the new pixels have the average of the pixels around them. Lots of TVs do this, but the method is a bit too simple: it will sometimes make things too blurry instead. The problem is to make sharp edges in the image stay sharp and blend elsewhere.
The next step up is to interpolate using curves: plot a curve between pixel values. This will nudge the blended value towards one or the other neighbour depending on the values of other neighbouring pixels around them.
There are lots of even smarter algorithms for upscaling, but the smarter they are the more hardware they require at a smaller gain from the previous algorithm, so at some point it does not become cost-effective for the TV manufacturer to go one step further.
This product is apparently for those who want to pay more for a better algorithm.