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Does this mean I need an HDTV that supports 720p to play all of the Xbox360 games?
No. Despite the fact that developers are only required to support 720p the video encoder chip built into the Xbox360 has the ability to up-scale and down-scale games to any of the resolutions supported by the Xbox360. This means that even if a game was only developed in 720p you will have the ability to play it in 480i, 480p, or 1080i as well as 720p.
Just read this out of the Video FAQ.
(Don't beat me up over it) So just to be clear I am reading this right..
The 360 will upconvert the games from 720p to 1080i? Not just display the games at 480p as the xbox (older one) does now?