tl;dr: you hold your phone way closer to your face. Read on for a
ridiculously in depth discussion of why 720p is just about the best possible choice for the Switch.
The PPI of a 1920x1200 6' screen is >320. That's over the DPI of a hardback book, designed to be held as close as 6 inches to your face. Distinguishing pixel differences at that resolution would require someone with 20/10 vision, holding the Switch at 6" range. This is roughly 1% of the human population, a level of vision that would make you qualified to be an Olympic level archer, and a level of vision that sharply declines after the teens for those who even manage to win it in the genetic lottery.
This is somewhat reasonable, because the primary task of a phone is text viewing, and humans hold the phone at a distance where the whole screen fits in the arc of both the foci
and the peripheral vision. We're focusing on a couple words at a time, and scanning text to take in the screen, and absolutely useless way to play a video game. Watch any phone user switch from their browser to a video game, they will instinctively hold the phone at a distance that allows the whole screen to be in focus the whole time. As screens get bigger, that minimum comfortable distance increases in order to fit the device in that arc.
I hold my phone at ~6" distances all the time. A "tight" hold on my Switch (if I've been playing for a while and have eye fatigue) is 15 inches, and that's already sacrificing some peripheral acuity.
I have never encountered a single person who could see the pixel gutters on the Switch - I've talked to
hundreds of people on forums who
think they can, but ask them about it and they don't see pixel gutters (the gaps between pixels) but they see jaggies. The clue is that they can only see the pixels "sometimes" or in "some games" - because they're not actually seeing the pixels, they're seeing aliasing artifacts and/or upscaling artifacts from not running the game at the Switches native 720p resolution. Increasing the resolution of the device could make this
worse as the native resolution of the game was likely designed to look good on a 720p screen, and might not upscale as cleanly to 1080p.
These problems are solved not by increasing screen resolution, but using the additional power of new device to drive the native resolution and frame rates of all games right up to the native resolution of the screen (eliminating upscaling artifacts), and running a more sophisticated anti-aliasing solution (fixing in-engine jaggies). As running a 1080p native image is
4x as much pixel pushing power as 720p, games would need to dedicate that much power to
just stay in place in terms of AA and upscaling artifacts, for visual data that would literally be invisible. Meanwhile, existing games that meet 720p and don't change at all - the best games currently on the Switch - will
gain upscaling artifacts at 1080p.
All this power could be spent on new, more sophisticated effects, higher drawing distances, etc. 720p isn't just "good enough" it is very close to "as good as possible"
Bonus round!
- Games are played by kids a lot, and yes, some kids have annoyingly good eyes before puberty destroys them! Nintendo already has a device for this. The Lite has a smaller screen, and thus a much higher PPI
- Some people do hold their Switches closer for legit reasons. Sometimes, it's because they're looking at tiny text designed for TV screens that aren't properly scaled on handheld mode - for these users, they may in fact see pixel gutters when they do this, but rarely do those people hold it there all the time - they alternate between a "text" distance and a "gameplay distance"
- Others just have astigmatism or age related visual acuity challenges. These folks might be holding their switch closer, but they lack the visual acuity to see the pixels anyway
- Note that the Steam Deck, a machine which was designed to be beefier than the Switch by every metric, actually has a screen with a lower PPI than the Switch. Nintendo isn't the only one making this call
- I wouldn't be surprised to see handheld gaming eventually move to 300 DPI screens, if for no other reason than the phone market may eventually make these screens so much cheaper than alternatives, and it does fix the "tiny text" and "kids with 20/10 vision" edge cases. However, that jump would still require that the devices be sufficiently powerful that the 4x jump in pixel count not be a problem. The Steam Deck isn't there, and neither is this device.
edit: fixed typo