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You are all thinking about the 1080p in the wrong way. Its not straight resolution size that's the point here. Just like how my Galaxy Nexus 720p isn't really best for my 4.5" screen. Its about the density and thus clarity of a picture this allows. All those extra small pixels allow for a highly dense and highly clear output that is a FAR better visual experience for the end user on a MEDIA based device. Additionally, you'll see great clarity in textual reading on web and other text based things you do on your phone.

Density and clarity.... not resolution.