When done well, an old film can look absolutely spectacular on dvd and/or high def. 35mm film has a resolution close to 6K (some say only 4K, but we've proven otherwise here at IMAX). The very best restoration work thus far has typcially come from Lowry Digital (now known as DTS Digital Images) in Burbank, CA. Grab a copy of 'Sunset Blvd' or especially 'Once Upon a Time in the West' and you'll be shocked at just how good an old film can look.
The basic process (when done right) is first to scan the original negative (when available) at a minimum of 4096x3112. This will usually
be saved as a 10-bit (log space) or 16-bit (linear file).
At that point, you then have a super high resolution digital file of the entire film. But due to age, it's likely scratched, dirty, and the colors are probably funky.
The next step is likely to run those files through some sort of software that will detect and automatically remove dirt and scratches. Every place will likely have a different software package to do this, but most all work essentially the same way. The software will look at a series of frames (often up to five frames before and after the current frame) and can "see" the natural motion in the scene. Anomolies that pop up, such as dust, dirt and scratches, are flagged. Once it's confirmed that these flagged spots are not actual content, they can be automatically removed. (by sampling the pixels from that area in the frame before or after).
So...now you've got a "clean" digital file of the entire picture. But it's likely rather grainy (due to old film stock technology) and the color is still messed up.
Degraining isn't tough, but keeping the image looking sharp AND grain free is. This is where very sophisticated proprietary software comes in. IMAX has a system, Lowry does...there are others. Basically what it does is analyze the particular grain structure of the film, detect the moving imagery, and remove or reduce the grain. This typically is going to soften the look of the image, so you then need to re-sharpen the image. It's a fine balance, and needs to be carefully tweaked by the operator so that you don't end up with an image that is too soft, or overly sharpened.
An added benefit to degraining is that when the files ultimately need to be compressed for dvd/hd dvd/blu-ray, the less grain there is, the more they can compress. A grainy image is very, very difficult to compress. What many studios are doing now is running all their films, even brand new ones, through a degraining process prior to making the dvd's. A quick degraining pass makes the dvd authoring process a lot easier.
Lastly is color. When possible, the original director or cinematographer will sit with the restoration people and re-time the entire show. Digital color correction is LIGHT years ahead of what was possible even a decade ago. Restorative color correction can fix just about anything. When done right, it's a long laborious process, hand color correcting each and every shot, but the results are brilliant.
Sooo...in the end you'll have a 4K fully restored file of the entire film. That can be down-rez'd to standard def dvd, and high def dvd. It's most likely going to be recorded back out to film at 4K, which will create a brand new 35mm negative of the entire film. Which if they want they can make prints of for theatres, but most often it's done for archiving purposes. (Film is still the safest medium to archive to).
Glad you asked?
oh...I should probably tell you how a BAD high def "restoration" is done.
1) scan the easiest thing you can get your hands on...be it negative, inter-positive, or even a 35mm print at 2K (2048x1556)
2) run it through automatic dust/dirt removal (if your lucky), and likely no one will check it.
3) give it one quick pass of color correction to fix the worst color issues, and at least try to have reel breaks match color.
Down rez for dvd and high def...and start printing discs. The major difference being the 2k vs 4k scanning (which allows for MUCH better restoration work to be done). The fact that they most likely won't degrain/sharpen the files at all, and finally the color correction will be done quickly. A good job takes a long time, and time is money. There's a reason really, REALLY good restoration jobs are so rare. They're expensive!
FYI...the entire James Bond series has recently been re-released on dvd...yes AGAIN, but this latest release got the full monty from Lowry Digital. I'd hold out for high def discs to be released, but these are certainly the versions to buy.