The set is down-converting your 1080 sources to a raster it can understand. Basically, it's clever enough to keep from freaking out when you plug a source into it that it wasn't rated for. It is doubtful your tv has a pixel count high enough to meet the spec for 1080p, and to be friendly with your gear it will still handshake.
No biggee. You could have a Philips that crashes and locks up when it gets an HDMI source it doesn't like. Take it and run with it.
Thank you for the info. i was just wondering why it did that, and i am VERY HAPPY with the tv i was shooting for a 720p and the tv i got for the price of $300 at Wallmart
i just coulden't believe at the beginning that i got a better tv by mistake LOL the games and the movies look amazing.