Image interpolation occurs in all digital photos at some stage– whether this be in bayer demosaicing or in photo enlargement. It occurs anytime you resize or remap (distort) your image from one pixel grid to another. Image resizing is necessary when you need to increase or decrease the total number of pixels, whereas remapping can occur under a wider variety of scenarios: correcting for lens distortion, changing perspective, and rotating an image.
Common interpolation algorithms can be grouped into two categories: adaptive and non-adaptive. Adaptive methods change depending on what they are interpolating (sharp edges vs. smooth texture), whereas non-adaptive methods treat all pixels equally.