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You're likely playing back your composition at a lower resolution than Full. A few things can contribute to the visual quality of what you see in the Program monitor:
1) The resolution of your comp
2) The Zoom level of your Program monitor
3) The playback resolution
Check out the screenshot below. This comp is 1920x1080 and on the left box you can see it's scaled to fit the Program monitor and the Playback Resolution is Full. If the resolution is anything less than Full you won't see all of your pixels during playback. If the zoom level is over 100% (which is possible when using the Fit option) you'll be blowing your image up and that can also contribute to quality loss. This is more likely if you have a low resolution sequence.
When you click the Wrench menu on the right, you'll see two sub-menus, one for Playback Resolution (which is the same as the dropdown to the left of the wrench icon) and one for Paused Resolution. The reason you're seeing higher quality when you pause is because the latter setting is likely set to Full while your playback resolution is likely set to something lower. Changing your Playback Resolution requires more processing power to show all your frames in real-time and might result in choppy playback or dropped frames. If this happens then you'll want to lower your Playback Resolution again.
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