Let's say you have a very small image you want to make larger. Also, let's say you want to keep the same proportions and shape. To enlarge an image, the scale factor would be greater than 1. For example, a scale factor of 2 means you make each side or dimension twice as big.
eg: a rectangle that starts off being 2 by 3 becomes 4 by 6, after you double each side
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Going in reverse, if the scale factor is between 0 and 1, say 1/2 = 0.5, then the image will get smaller.
Example: a 10 by 50 rectangle becomes 5 by 25 rectangle after you multiply each dimension by 0.5 (aka divide each dimension by 2).
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So the general rule is if the scale factor is larger than 1, then the new image is larger. If the scale factor is less than 1 but greater than 0, then the image will get smaller.