It may be that the 3D images alternate, rather than get combined. On a LCD or Plasma screen, this wouldn't cause flicker. Most 120 Hz screens use image blending to achieve "fake" frames that aren't actually present in the image data from the movie/TV signal, etc. I imagine this tech could be adopted to allow 2 images to be superimposed on each other, over multiple frames, making for an apparently smooth 3D image.
I suppose, from that perspective, the 360 might be able to render 3D games, given the right rendering process, but it'd have to spit out images pretty fast to do so without flicker. That's probably was GT5 and Wipeout HD were chosen -- their framerate is stellar. It may just be that there aren't any 360 games readily available to run at 120 Hz, and that's why MS didn't show anything.
It may also be that lower framerate 3D may only be achieved on the PS3 for the multiple render targets reason -- the PS3 may need to spit out 2 images per frame to feed those TVs, and the X360 may just not be able to produce more than a single image per frame, which would be fine at 120 Hz, but wouldn't work at lower framerates. I'm just speculating though.