From:
http://www.coldforged.org/archives/2...efinition-faq/
Q. My HDTV only supports 1080i but I’ve heard that most games are programmed for 720p. Will I be able to play games in high definition?
A. Absolutely. Some HDTVs do not include a built-in scaler to handle non-native resolutions. The Xbox 360 has the needed built-in scaler that will scale the output to any resolution you need. In the case of HDTVs that only support 1080i, the game might render to an internal 720p frame buffer, but the output scaler will scale that output up to a 1080i signal that your HDTV can display. Yes, it will still be gorgeous. As an example, both ABC and ESPN-HD broadcast their high definition content in 720p, so if you’re receiving that content there’s scaling being done somewhere in your equipment chain.