Most games should perform better in 720p, where as TV/movies will look better in 1080i.
Progressive Scan has a much bigger impact on games....

To all the people above me that said 1080p is better...Wow, Really???
In other braking news: Water is wet and fire is hot...

720p

I confirm. Also, people with more sensitive eyes, could perceive flicker in the outer visual field looking at interlaced still images, as flicker stimulates the eye quite like (**) a fast oscillating motion (*). Slow motion is where interlaced behaves best because time integration made by the eye smoothes interlacing flaws, while isn't fast enough to generate undersampling artefacts.

(*) Emergency vehicles' beacons are almost always blue because human outer visual field, although low res, is more sensitive to blue and fast motion, so you can perceive them fast approaching better.

(**) The appearance is similar, but flicker is much more tiring for the eye than watching true motion.

So much nonsense!

If your device can display 720p, then it's progressive, so there's no flicker at all, as even interlaced images will be rendered in progressive : hence no flicker.

If your display is progressive and can display every line of 1080i, then it's a 1080p (Full HD) device. Thus, on such a device, which of 1080i or 720p is better? It depends entirely on the electronics in the device.
Most progressive device (LCD, plasma, ...) can't render interlaced correctly because of "cheap" components.

Rendered with good components, true 1080i will always be better than 720p, even with fast moving images.

But the current reality is that for most progressive devices, 1080i is badly rendered.

I like p.

It depends on your TV. If it's 1080p, I was told that the built in scaler would have and easier time (ergo better picture) converting 1080i into a progressive format and not changing the resolution. Which is what it would have to do convert the 720p to 1080p. I hope that makes sense.

Listen to this guy, ignore everyone else.

The fundamental question that's been ignored so far is what kind of TV do you have? If it's 720p, then there's no advantage at all to 1080p -- you can't display the extra lines. On the other hand, on a 1080p screen that's capable of properly deinterlacing, 1080i can be functionally almost the same as 1080p.

The question then is whether your set properly deinterlaces. Most higher-end 1080p sets these days do, but I don't know about the rest. If you can't tell the difference anyway, it's nothing to get bothered about.

i have a 1080i/720p capable tv and when playing cod4 on 720p it looks great. However when i switched to 1080i i could really tell the difference... in a bad way. i dont know if there was more detail etc but it just looked so much more rubbish , it was definitely softer and blurrier in a bad bad way i recommend 720p for fps at least

I'll just stick to 720p. I suspect that Oblivion will look better in 1080i, and I know worms does, but ToV and Geometry Wars will both look weird. At least... GW looks weird in 1080i, and I am getting ToV Limited Edition today.

720p work better for me on my old LCD TV.