It's most likely due to the refresh rate, if your like me fast-pase gaming is better with a high refresh rate 75+.
(How many times if refreshs the screen with an image)
Default is however set to 60 on most monitors, which looks fine to the average eye,
it is normal that flat screens can't support high resolution as well as a high refresh rate. You're limited to 1280x1024 max resolution if refresh > 60.
Set your refresh rate to 60, apply, then raise your resolution. It will be under your advance settings options for the monitor.
Control Panel > Display > Resolution > Advance Settings > Monitor > Refresh Rate
If not, the other limits are either the monitor or graphic card.
Is your monitor wide screen or not? 1920 x 1200 might be a better resolution.
Your Intel Extreme Graphics 2 is a built-in graphics card, to make the most out of higher resolution in games I recommend going for an actual graphic card from Nvidia or ATi, etc. You might lag out otherwise at those resolutions mainly because your sharing system memory and it's slower to store large textures. Major performance increase buying a decent graphic card.