And if resolution doesn't matter they why aren't we still playing Playstation and Playstation 2 games at 512x224?
Because video standards and hardware power have changed.
We can play games in higher resolutions because the hardware allows us to. Scaling also plays a huge part.
I think the question was more about the differences in resolutions that we are seeing right now between the consoles. The jump from 480 to 720 is larger than the jump from 720 to 900 or even 720 to 1080.