I think this is true if you want your images to look better on a higher resolution screen.
For example, let's say you make your game for 1080p screen and put two identical images on the layout - one is 500x500px resized down to 250x250px (resized on layout), another 250x250px (real image size).
On a 1080p screen both images will look the same.
On a 4K screen the first image will look slightly sharper than the second.
But it will also use much more memory.
I see. Thank you for clearing this up.
Question now is, will the size reduction/scaling apply for both 1st and 2nd cases in the op post?
Given both have same source images, one is scaled down in Sprite menu, the other is scaled down in side bar
EDIT:
When you scale down images in Sprite Editor, you reduce their quality.
When you scale down images on the layout, you also reduce their quality and wasting video memory.
So to my understanding, I should continue reducing them in layout to keep that sharp look for both small and large screens?