If you think of a television screen being broken up into thousands of spots, like a mosaic (left), it makes one image. The more you have, the more detail in the picture. It's the same with the resolution of a television.
However, really high numbers are only beneficial for HDTV and other high-definition content, like Blu-ray movies. So even if you're watching standard television on a 1080p screen, you will only be seeing 720p.