A number of Wii U games have been announced with support for a native 1080p HD resolution, including Monster Hunter 3 Ultimate, Trine 2: Directors Cut, Skylanders Giants, and Toki Tori 2.
1080 refers to the number of horizontal lines of visual information displayed on a television screen. For comparison, the Wii, like pre-HD TVs, offers a measly 480 lines. The more lines, the better-looking the image.
The “p” in 1080 p stands for progressive scan, as opposed to “I” for interlaced, and tells you how the image is output to the screen. According to hometheater.about.com, an interlaced scan outputs every other line, then lays in the other lines in the gaps left by the first scan. Progressive scans place the lines in order, resulting in a crisper, smoother image. Because of the difference in quality between interlaced and progressive scans, tv.about.com says that 720p (720 lines, progressive scan) is equivalent in quality to 1080i (1080 lines, interlaced scan). I also learned that the difference between 720p and 1080p is barely noticeable on a 32” screen, so if you’ve got one of those, you have no reason to care about 1080p at all.
Currently the best HD resolution you can get on a TV is 1080p. This resolution is supported by the Xbox 360, PS3, and Wii U. However, most games are released in 720p. This is because the power it takes to output such a detailed image can impact frame rates. Ideally, you want a 1080p game running at 60 frame per second; ultimately if you have to choose one or the other, the frame rate is more important. This means it is easier to offer 1080p in a simpler game – say, a side scroller like Toki Tori 2 – than in something more elaborate like Call of Duty: Black Ops 2. However, a number of elaborate games, including Black Ops 2 and ZombiU, are rumored to be coming in 1080p. (An activision spokeman announced that Black Ops 2 will run in “full HD,” a term which usually is used to refer to 1080p).
If you look on the back of a PS3 or 360 game box you will see that most of them will display at 1080p; however, many of these games are upscaled. This means that, while the game displays at 1080p, there are not actually 1,080 separate lines of visual information being supplied. Instead, a lower number of lines are used to extrapolate a 1080p image. Games that have a full 1,080 lines of data are said to be running in “native” 1080p. The PS3 has a fair number of native 1080p games, particularly among their downloadable, Playstation Network titles. The 360 has only a handful of native 1080p games, the rest being upscaled. If you’re curious, a list of PS3/360 games and their resolutions can be found here.
It is unknown at this point how common 1080p games will be on the Wii U; Nintendo has said their own games will be native 720p (although they made a quickly rescinded announcement that New Super Mario Bros. U would support 1080p). Nintendo hasn't said whether they will upscale the games they release at a 720p. What we do know about upscaling is that Nintendo won't do that for your old Wii games, which are doomed to run at 480 on the Wii U.