It could be one of two things:

(1) You are looking at the preview window which does not deinterlace. You should be checking how your video looks using the Secondary Display function with the Deinterlace setting enabled.

(2) Your footage is interlaced and either Vegas Pro didn't detect it, or in your Project Properties you have your Deinterlace Method set to None which is always the wrong setting when working with interlaced footage.

One of those two should fix it.

~jr

Upload an example somewhere.
Could be any of the above plus a couple that weren't mentioned.

An experiment to try to see if the problem is your footage or your settings is load in Vegas various formats of footage and see which footage becomes jagged with these settings. I have avi, AVCHD, HDV, MOV all in 1080 24p, 30p, 60p, 60i as well as 720-30p & 720-60p. Try this and you will learn that your preview window lies to you. What is jagged in your preview may not be after final render.

Others in this post are correct - you have interlaced footage and need to pre-de-interlace before ingesting it or set the Preview window setting under Options to "Apply Deinterlace Filter".

Also, set your project settings to match your Source Media under Project Video Properties. Where you will have trouble is if you have varying media formats. Don't be afraid to experiment with different settings like going from 1080-60i to 1080-24p ot 720-24p or 60p even, I like having Vegas convert my interlaced 1080-60i footage to 24p. But it is choppy and unnatural with photo montages if you use fast pans, due to the frame effect.