FSR1 takes output image and uses AI to upscale it. As such it can be used from the system.

FSR2 is part of rendering pipeline of the game. It takes “movement vectors” that games provide to predict how pixels will look in the upscale, thus in general being more truthful to the expectation. This also means you can only get it from within the game.

FSR1 gives out watery paint look when used. FSR2 can introduce shimmering, especially in rapid movements. Ideally you should only use FSR with the quality preset on SD. Quality upscales from 480p to 720p, while performance uses 360p as base. The lower you go the less pixels it will have to figure out the final image and the worse it will look.