To bring some people up to speed, Sony admits that they have an issue displaying HD graphics on HDTVs that do not have 720p support. Do HDTVs exist that do not have 720p? Of course!
Many early adopters have HDTVs that display in 1080i (HD) and 480p (Not HD) and the PS3 assumes all HDTVs have the ability to render 720p:
"A small number of older High Definition television sets found in the United States only have 1080i inputs for HD signals. Those televisions will currently only play some PS3 titles at 480p resolution. PS3 games render images at either 720p or 1080p for High Definition, and you need 720p input on the TV to play select games that do not support 1080p. This is an issue on the side of the individual television sets, which do not accept 720p input, so when a game outputs an HD signal only at 720p, these select TVs have to display the game at 480p instead."
Sony has told news journalists that it is easily fixable in a firmware upgrade. Well, the recent 1.3 firmware update still does not fix the problem. Interestingly, the "easy" part of that statement has been retracted and now we wait for the real fix.
For HDTV owners with 1080i-only support you can configure your console to play Blu-Ray movies in 1080i manually before starting the movie. This doesn't work for games from all reports, so you're out of luck there. You can continue to game in 480p resolution with the Nintendo Wii.
Some of us see this as a true blunder on Sony's part given "early adopters" are those that own HDTVs that do not support 720p. Many "early adopters" pickup hardware at higher prices to be the first to have it which is one of the strong points to the PlayStation 3 because many gamers and HD fans will pickup the console so they can quickly adopt the Blu-Ray concept (cheaper) and be the first to game on the more powerful console on the market. Yet, it's the early adopters that may be stung by this issue.
sources:
1up.com
gamedaily.biz
wikipedia on 1080i resolutions
wikipedia on high-definition
