"I think that it's going to be a win/win," Michaels told reporters during a Wednesday media conference call.
"The contestants are coming in as not really professional. They're just starting out in the industry. They're going to be put with these people that get it. First of all, they know the game on the show. They know how to play it. They've also gone onto become working, professional dancers in the business that choreographers and directors hire all the time. So they're really seasoned at this point."
Michaels added that the contestants being paired with all-stars can either help or hinder them.
"When they're on the stage with these contestants, the contestants are either going to have to step way up -- which is going to be great for them -- or the all-star could wind up carrying them," she explained to reporters.
"Or it could be the other way. I don't think so because the all-stars are so comfortable. It's going to be interesting to see how it plays out."
Regardless, Michaels knows that viewers will definitely win due to the change.
"To have that energy play out on the stage is going to be explosive," she said.
So You Think You Can Dance's seventh season will premiere Thursday, May 27 at 8PM ET/PT on Fox and feature Michaels replacing Mary Murphy and joining Nigel Lythgoe and Adam Shankman as the new third member of the show's regular judging panel.
Michaels said she'll be "very honest" as a judge -- providing "tough love" and "support" at the same time. In addition, she described her role on the judging panel as the "artsy-fartsy one."
"I'm all about the art of dance. I'm sitting in a very commercial world, but I come from a different point of view because that's what really turns me on with dance is the artistry and the commitment and the work ethic and the craft," she explained.
"That to me is everything because at the end of the day, the dancer that's going to work are the dancers that have a great work ethic, that can perform their asses off on stage."
Michaels said she's also interested in the "spirit of the dancer."
"I think it's so, so, so important to have that honest spirit," she added. "I want to see the artist. I want to see the person that's worked years and years at their craft. I don't look for perfection. I really don't. It's more of the whole package."
Since she's now serving as a regular member of the show's judging panel, Michaels said she's unsure how frequently she'll be choreographing contestant performances during the season.
"We're still trying to work that out. I definitely would do some group numbers," said Michaels, who added she also wouldn't be opposed to temporarily relinquishing her judging reigns for the chance to choreograph some individual contestant routines -- which sitting judges aren't allowed to do.
"I'll step down, for sure, because I'm an artist first. I will find a way. I wouldn't be able to judge and choreograph at the same time, but we'll find a way."
"I needed that time to go away because the seasons were back-to-back. I needed that time because I was building and developing some projects of my own. I really needed that time to go away and work on those things and get them all of their feet," she explained to reporters.
"I was also dealing with my mom, who was sick at the time and passed about a month ago. So it was my personal life as well as my family and my career. I just needed time."
Michaels said Lythgoe contacted her earlier this year and asked if she'd be willing to return, but in a larger role than she expected.
"I thought I would just come back as a guest once in a while," she said. "But he asked me to do this and I'm gung-ho. I'm excited to be back."