Featured Image Resizing

I'm having an issue with resizing featured images. If I upload a smaller image, it seems to display without being blown up. However, if I upload a larger image and use Wordpress to size it down, the image still shows up HUGE, only now it's pixelated because I scaled it down. Why is that? How do I get the image the size I want? Does it need to be small before uploading in the first place?