There are three types of LCD panel: TN, VA, IPS
These are in order of increasing cost and (generally) increased quality of image, so TN is the worst quality but cheapest, and IPS is the best quality and most expensive.
TN monitors have pretty terrible viewing angles, and so rotating one 90 degrees will give the change in quality you mention -- viewing them from anything but fairly straight-on will mean that colours start to go very strange and possibly inverted, and brightness can vary a lot across them.
So, to answer the original question:
No, not all LCD monitors do this. Just the cheap ones!
edit: TN panels generally have poorer viewing angles in the specs, so they are likely to say something like "170 degrees vertical/160 degrees horizontal" rather than the 178/178 which VA and IPS panels will state.
2Whaddya mean "significant drop in quality" – bobobobo – 2009-08-07T21:17:38.520