Well, to actually explain what Nearest and Linear do:
When downscaling (or upscaling) Images, you can decide how the graphics card is going to do it:
When set to Nearest, the graphics card will simply look for the texel that is the nearest to the pixel it should be placed to.
When set to Linear, the graphics card will look at the surrounding texels and try to linearly interpolate the colors and set the pixel color to the computed color.
That's why Linear appears smoother.
Though I thought that that's not the effect you wanted to have. It looked like your game is a little more retro, and usually you use Nearest Filtering in retro games, since this is mostly how 'retro' games look.
Anyways, glad to help