When using the new iMac 🖥, how come the images for apps are crystal clear (apart from steam apps), but as soon as it comes to playing a video the Mac just decides to lower the image quality dramatically?

App’s icons and graphics are made at super high resolution to compensate the high density of the screen. It’s not Apple’s fault if you watch movies made by others 😜
You should watch them at post stamp size if you want to appreciate retina resolution.