Yep, it's bullshit. Like Sterling said, they sold us this mentality and now they're having problems dealing with it.
Very true. MS itself used this a lot in the last gen as the reason the 360 and 360 versions were superior. Some publishers touted this kind of thing as well. But it's true, the "average joe" doesn't really care, as long as it looks great.
Now, the difference between 720p and 1080p IS definitely noticeable on today's bigger TV's (50-60 inch or so). But what makes more difference than whether something is 900p or 1080p is the quality of the animation and effects. Yes, hardware is less powerful if it has to run at 900p to get the same level of animation and effects as another 1080p version on other hardware. But as long as those effects are there and the animation is smooth...people playing that game really won't care. Nor should they, if they enjoy the game.
Bottom line, the resolution game shouldn't have been started. It's bad for developers as their product now has to hit imaginary "perfect specs" on each hardware platform. If they can't do it like a lot of thise XBox One vs. Ps4 versions than the developer takes some heat for "being stupid" or "lazy" in not being able to make the hardware perform at the level people arbitrarily expect. It's bad and good for the hardware vendors...mostly as a marketing point. It was good for MS during the last generation and obviously bad for them this generation as they find themselves on the opposite end of the "raw horsepower" discussion. It's bad for consumers as it generates a ton of negative (positive too, but negative is always more powerful) buzz regarding different hardware platforms that in the end almost always has no effect on whether or not they will enjoy playing the game on this system or that.
My personal take on it is that while it's fun for us geeks to debate and yell "gotcha!" back and forth as we advocate for our personal preference in platform, but really has no relevance at all to the market in general.