Any trained eye can also clearly see aliasing doesn't look natural either. It is a distortion/artifact of the intended shapes.

Anti-Aliasing and higher resolutions are trying to fix that distortion/artifact... with more or less success depending on the chosen AA method, additional processing power, game engine and art style.

Is it? Because aliasing is the result of raw image output being transferred to pixels. Anti-aliasing at it's core is a way of mixing two neighbouring pixels onto a mix of both. It's way more complicated than that obviously, because there are a lot of different methods of how to process the image. Simple mixing would make the picture appear to be blurry.  

I hope you're trolling.

The human eye does not see in square pixels, so aliasing is by its very nature an unnatural, artificial distortion. A properly anti-aliased image is more natural and pleasing to the eye as the jagged artefacting has been suppressed.

The human eye cannot "see" on its own. It perceives a certain frequency of electro magnetic waves through it's photoreceptors and translates it into impulses which are send to the brain where an image is being processed and filters being applied. The "see" part is accomplished by the brain.

There are a certain limited amount of photreceptors positioned in your eye that are similar to a cmos in a camera. It's not like real aliasing does not exist. It's that, your brain just processes the information in such a way that you don't notice the fine details which are send as impulses to your brain. Your concsiousness never receives the raw information from your eyes or rather said, we humans are incapable of perceiving how reality really looks like, because the lack of senses and applied filters by the brain.

Do we really need to go that far if we wanna talk about 720p aa vs 1080p without aa?  

Yeah, the amount of photreceptors in the eye is limited. And if the screen resolution is high enough, the steps/breaks on an aliased line won't matter and it will be perceived as a straight line.

But 1080p in a normal viewing distance ain't enough for that, otherwise we wouldn't even see a difference between AA on and off in a game. If we all had 8K or 16K displays and unlimited processing power to natively support these resolutions, we wouldn't even need AA techniques, which are always a compromise to downsampling to keep the additionally needed processing power lower.

720P with AA and 1080P without Anti-Aliasing... WHY should it even be an option? Why not have Anti-Aliasing with both modes?
At 720P (handheld) it should be a requirement. 720P is a crap resolution to begin with, it needs all the help it can get. 1080P is better. But it still needs Anti-Aliasing.

Even at 4k there is benefit to having Anti-Aliasing.

That's all kind of beside the point though; normal human vision isn't plagued by the kind of aliasing we see in video games. It's an artificial distortion brought on by the image being composed of square pixels. Anti-aliasing reduces these distortions, creating a more natural and pleasing picture.

Fair enough. 

The bilinear filter on the N64 was rotten, to be sure. The AA really crippled the 2D assets, though. When disabled (through emulation, modding, or using a game-shark), the there is a noticeable improvement in clarity. 

Pulling the veil off of the game by removing the bilinear filter DOES reveal some pretty noticeable dithering, but I still prefer the sharp look. To each their own, really.

The weird thing is that Nintendo did use AA on some of their Wii U games, but not others.

Hopefully future Switch titles like ARMS, Mario Odyssey, Xenoblade 2, etc get back into the habit, it's not a good look for their first party games to be falling behind most PS3/360 games in this regard.