Toy Story was a transitional project. Since Pixar couldnt send digital data to theaters, every one of the movies frames was printed on analog film. When Toy Story originally hit home video, that 35 mm version was its source. Only years later, after technology advanced, did Pixar start doing digital transfers - - cutting out the middleman. And Toy Storys look changed with the era.

Source: The ‘Toy Story’ You Remember - by Animation Obsessive Staff