The image Quality sets the Voodoo3 to 24 bit color 16bit bufer 8bit stencil instead of 16/16/8. The TNT/TNT2 use 16/16/8 for 16bit color and 32/24/8 for 32bit. In most games you really don't see any diferance. I just ignore it.
The smoother setting though really helps. It drastically reduces or eliminates verticle lines and "screen door" effects. This eliminates the screen door effect on the rocket smoke in Q3 and the banding in Descent3. Very nice with no speed hit.