720 and 1080 has to do with resolution, and has nothing to do with aspect ratio. Resolution may be displayed in pixal x pixal representation, but has no real significance. Electronics firms love specs that they can throw out and look impressive. In truth, it takes an expert to sort through all the garbage to understand the relationship of the various bits of information.
Whenever a movie is converted to DVD, it is modified to widescreen (16:9) and full screen (4:3). In cinema, there are several aspect ratios, but the most common are 1.85:1 and 2.39:1. Movies used to be 1.33:1, but changed in the 50s because television was taking away so much business. Since television was standardized on the 1.33:1 ratio, they went wider. the 4:3/1.33:1 ratio goes back to 35 mm film.
If a movie is in the standard CinemaScope 2.39:1 ratio, they will crop it to fit widescreen and full screen. Usually widescreen versions will lose a little from the bottom and/or top and most do not notice. In the standard cinema 1.85:1 ratio, they still crop a little but it is very hard to notice. With 1.33:1, they will crop the sides, which can be noticable. Some films it makes no difference, but other lose a lot of scenery. A lot of people do not realize that when they traded their old CRT TV in on a flat screen HDTV, that there was a need to go bigger. The difference in area between a 32" CRT and 32" flat screen can amaze you.
And while this is interesting information, the fact remains that Apple did their research and found more people loved the look and feel of the iPad design they put out. They looked at all the pros and cons, and said this is good. Never said it was perfect, but that it was the better choice.