SVG stands for Scalable Vector Graphics, if you export from Photoshop (which is a raster graphics editor, not vector) into Illistrator, you're effectively working with raster graphics and not vector graphics. If you design it directly in Illistrator (which is a vector graphics editor), you'll get something scalable that can scale the size of mount everest and still not pixelate.
Microsoft clipart is an example of vector graphics, they always scale any size no matter how how much you stretch them.
Have a look at wikipedia: http://en.wikipedia.org/wiki/Vector_graphics
PS, I'm no guru, I only know how to do simple vector designs in inkscape, but as a rule, I do everything in vector graphics and whenever I need a bigger or smaller version of it, I simply export the graphic in whichever size I need it which makes it look sharp no matter how small or big the exported image is.