You guys are confusing the signal with the native resolution. A TV with a 1366x768 resolution (most "720p" TVs) will always display a 1366x768 resolution (unless placed in 1:1, dot-for-dot mode which is usually called PC mode, but that's for a totally different discussion). Any current HDTV can accept a signal of the following resolutions: 480i, 480p, 720p, 1080i, and 1080p. The TV will then possibly scale and/or deinterlace the signal to be displayed at its native resolution (usually 1366x768 or 1920x1080).
Your PS3 is simply sending a 1080p signal to a 720p TV. There's really nothing more to it than that. Your TV will scale the 1080p signal the same way it would scale a 720p signal (since it's native resolution is not true 720p, which would be 1280x720). Sending a 1080p signal to a 720p TV doesn't make it a 1080p TV any more than sending a 720p signal to a TV with a 1080p native resolution would make it a 720p TV.
In other words the resolution of the signal source and the native resolution of the TV are two totally different, completely separate things and should be viewed as such.