Do you have Pixel Preview turned on by chance? It would be checked under View>Pixel Preview. This would give you a pixelated preview, mainly intended to give you an impression of how your image would look when saved for the web.
Another possibility is that you have some type of raster effect applied and you have the Raster Effect settings set for a low resolution (i.e. 72 ppi). You can change this setting from Effect>Document Raster Effect Settings.
Try those things, and check back here if that doesn't work for you.
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