One of the reasons that 720p looks good is that 720 V lines, a full frame, are displayed 60 times a second. Humans are more sensitive to vertical resolution than we are to horizontal resolution. The 720p format definitely has lower H res than 1080, but we don't seem to notice it much.
Bottom line is that both HD formats look very good.
1920 x 1080, recorded on a VTR that can capture that resolution, has the largest pixel map, but the 60-full frames per second of the progressively scanned 720p format handles motion better. Users should make their choice accordingly.