Technically they are going to produce pretty much the same thing. However, based on the native resolution of your TV; you will see a better picture. Check our your tv's manual for that.
the people who say set it to the native resolution are correct. the people who say you cant really tell a difference are correct to. i guess it could also depend on the game your playing. If your doin forza 2 or some fast racing game you might want 720 but if ur playin gears, maybe 1080.
720p cause you're running the game at its NATIVE resolution. If you're playing on at 20-40 inch lcd/plasma tv then you won't know the differnce between the two. With that said certain games (like Forza 2) run natively on 720p and if u run it on 1080i you might see some tearing and shearing or extra jaggies (happened to me). Also 1080i won't show 1080p detail (once again only see difference with large scale tv's), but on certain levels it does (depending on the content) show better detail, but are hardly noticable.
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