Here is the text of a post on another topic from AVguide member Lear:
The eye/brain can decode far more than 720 lines of information. The decoding ability of the eye is a function of the spacing of the lines and the distance of the eye from the lines. That's because the eye's resolving power is measured in degrees (arc seconds). Theoretically, the eye can resolve line spacings of 20 arc seconds; in practice somewhat less and often thought to be around 60 arc seconds (alert: often these measurements over time prove to underestimate what humans can do).
In practical terms, a 50" diagonal 720p display that is 10 feet from the viewer will, in the view of most optical researchers, have a line structure that is just visible (using the 60 arc second limit). The theoretical resolving power of the eye is much higher than this (you would need to be 30 feet away for the line structure to be just visible; any closer and it would be obvious).
Said differently, if you wish to sit 10 feet from a display, and the signal is 720p, the largest screen you can have without being aware of the pixel structure is 50". With 1080p or 1080i, the largest screen by this calculation is about 70". Using the same approach with DVD (480 lines), you get a max screen size of 33".