VLC is not recommended because it -
Some comparisons showing these issues -
https://slow.pics/c/XhbmrYgU (Spice and Wolf by MTBB)
https://slow.pics/c/vH560pvp
Options affecting video quality are explained in more detail in the config guides linked above, but here's a summary of the important things -
Firstly, quality is not the same as resolution. Secondly, whenever something with a different resolution than your display is playing on it in full screen mode, then something is scaling it to the resolution of the display. This something is usually the video player. For example, playing a 1080p video on a 2160p monitor means that it has to be upscaled to fill the screen, otherwise it'd simply play in 1/4th of the screen. Upscaling is not a choice that you can enable or disable while in full screen, the only thing that can be changed is the method of scaling. Consequently, upscaling is not something you can use to "enhance" the video when playing back at the same resolution. It is not a way to somehow improve 1080p video playing on a 1080p display. The shaders activate only when the video resolution does not match the screen resolution and scaling is needed.
The default scaling on most players is bad. Mpv has a built in high quality profile called gpu-hq which enables better upscaling algorithms (scale=spline36, cscale=spline36, dscale=mitchell). This option is necessary even if you use external shaders to act as a fallback. Any scaling options explicitly specified after this will override it. For those with powerful gpus, even higher quality external shaders are available - FSRCNNX, NNEDI etc. The file has to be placed in %appdata%/mpv/shaders and the line glsl-shader="~~/FSRCNNX_x2_8-0-4-1.glsl" has to be added to the config. Press shift+I followed by 2 for confirmation that the shader is working. Dropped frames or high frame times (above 25ms) are a signal that your gpu isn't able to keep up and you should switch to a less demanding shader.
The shaders mentioned above are 2x scalers, which means that they always scale by 2x. For 720p to 1080p, the video will first be scaled to 1440p by FSRCNNX and then downscaled to 1080p by dscale=mitchell. For 720p to 2160p, FSRCNNX will do 720p to 1440p and then scale=spline36 will scale it the rest of the way to 2160p. When scaling below a certain threshold is required, FSRCNNX will not activate and mpv will fallback to spline36. There are also scalers like ravu-zoom can upscale to arbitrary ratios, at the cost of slow performance because of rendering to the target resolution directly.
Ravu and NNEDI - https://github.com/bjin/mpv-prescalers
FSRCNNX - https://github.com/igv/FSRCNN-TensorFlow/releases
The same kind of filtering that is used by encoders but in real time. It's not an alternative to a good encode, but rather a temporary fix for web sources. Debanding is the most commonly used and the only one necessary. Detail enhancement, noise reduction, sharpening etc. are not recommended. All these options are available with both mpv and madvr. More about quality, video artifacts and encoding in the quality guide.
There are three ways of using Kodi on a TV -
1. Kodi installed on a computer which stores the content and is directly connected to the TV.
No decoding problems with a powerful cpu.
Possibility to use high quality shaders that utilize your gpu to improve upscaling with an external player of your choice.
Control using a normal mouse+keyboard or through an android app like Yatse.
2. Kodi on a TV/Android box with the content on a separate computer.
3. Kodi on a TV/Android box with the content on a separate computer running a media server.
Transcoding is only a last resort to deal with compatibility problems. Direct play is always prefereble to transcoding, which affects quality and uses cpu power on your server. More about transcoding on plex - https://support.plex.tv/articles/200250387-streaming-media-direct-play-and-direct-stream/
Here, Kodi acts as a client,increasing compatibility and replacing the default one that comes with Plex, Emby or Jellyfin. This is done through their respective add-ons for kodi.
The setup consists of two parts - the server and the client. A client is simply a media player that will access the content from a server. The server runs on the device which stores your content. Both may be installed on the same system, but they're separate applications. Usually you'd have the server on a computer connected to other devices in your home network and a client installed on all of those devices. All three of the popular ones come with their own client/player as well as support for using kodi as a client (recommended for anime).
Decoding is the process of playing the video file. There are two types - hardware and software. Everything can be decoded, the difference is in the amount of work needed to do that. When it's hardware accelerated, it doesn't put any strain on your device cpu.
Most PC players will decode everything with swdecode as a fallback option. The problem is when this decoding isn't fast enough to play your video in real time. That won't ever be a problem is hwdecode is supported for that codec.
If you're watching on a TV/+Android box, you'll see a list of supported codecs in their specifications. Plex and other media servers will recognize a format as not supported and start transcoding to h264 8 bit. Kodi player is the better option it'll fallback to software decoding like on a PC, giving you the option to always direct stream or run without a server. However, since the cpu on your tv/box is much weaker compared to a PC, there will be instances of horrible lag when trying to force swdecode. Note that software decoding utilizes your cpu, so the cause of lag isn't limited to decoding. It's anything that might be using your cpu at the time. Like when there's a lot of complicated .ass typesetting which needs to be rendered, that will lag with a weak cpu no matter what the video codec is. Generally -
Anime usually has .ass subtitle styling, while the subs will show up on most TVs and players (plex, emby, jellyfin etc.), the typesetting or overlapping dialogue is sometimes broken. This is especially a problem if you're watching fansubs. Kodi is one of the few players which supports proper ass rendering. Note that the player is separate from the kodi media server and can even be used with plex.