UPDATE: Bungie's Response is at the bottom of the article. Microsoft's marketing campaign is brilliant. Stay in the news all the time by releasing less than superior products, infuriate your core users, and then apologize later. In the midst of stories like Limited Edition cases scratching discs and unreadable discs, here is another one. Beyond 3D Forum has been busy looking at screenshots of Halo 3 with a microscope and it turns out that Halo 3 is only running at 640p, much less than the minimum HD requirement of 720p. GamerRawr has posted the whole process of how they came to this conclusion. It's a little complicated so put on your thinking caps:

Here is how the math goes: Each “step” in a jaggy alias line equals one vertical pixel at the images native resolution (for angles beneath 45 degrees). In this example there are 16 steps in the jagged line. This means in the native rendering, there in a 16 pixel height difference between step 1, and step 16. This picture was taken on a 720p native LCD, running Halo 3 at “720p.” So when you have an alias line with 16 steps, there should be a physical height difference of 16 pixels. But instead here, there is an 18 pixel height difference!
Click image for hi-res version. What this means is the native image is only 16/18, or 88.88% (repeating), of the 720p outputted image. That means Halo 3 is only internally rendered at 640p, and the image is upscaled by the 360 to 1280×720. Running at only 1138×640, that means there are 728,320 pixels. That’s a full 193,280 pixels LESS than 720p. In fact, it is even less pixels than your very average 1024×768! Hardly what anyone would consider “high-def.” Again, these conclusions are not just being drawn from this one image. It has been verified on multiple displays running in 1:1 mode. When an LCD is running in 1:1, that means ever[sic] pixel in the image is mapped to it’s own pixel on the display. In every instance it is conclusive that Halo 3 is running at precisely 640p. This of course does not change how much fun the game is, or even how good it looks… even if we’re getting robbed of a few (hundred thousand) pixels.

There you have it kids, in plain English. UPDATE: Bungie has replied to the claims with this message:

One item making the interwebs rounds this week was the scandalous revelation that Halo 3 runs at "640p" which isn't even technically a resolution. However, the interweb detectives did notice that Halo 3's vertical resolution, when captured from a frame buffer, is indeed 640 pixels. So what gives? Did we short change you 80 pixels? Naturally it's more complicated than that. In fact, you could argue we gave you 1280 pixels of vertical resolution, since Halo 3 uses not one, but two frame buffers - both of which render at 1152x640 pixels. The reason we chose this slightly unorthodox resolution and this very complex use of two buffers is simple enough to see - lighting. We wanted to preserve as much dynamic range as possible - so we use one for the high dynamic range and one for the low dynamic range values. Both are combined to create the finished on screen image. This ability to display a full range of HDR, combined with our advanced lighting, material and postprocessing engine, gives our scenes, large and small, a compelling, convincing and ultimately "real" feeling, and at a steady and smooth frame rate, which in the end was far more important to us than the ability to display a few extra pixels. Making this decision simpler still is the fact that the 360 scales the "almost-720p" image effortlessly all the way up to 1080p if you so desire. In fact, if you do a comparison shot between the native 1152x640 image and the scaled 1280x720, it's practically impossible to discern the difference. We would ignore it entirely were it not for the internet's propensity for drama where none exists. In fact the reason we haven't mentioned this before in weekly updates, is the simple fact that it would have distracted conversation away from more important aspects of the game, and given tinfoil hats some new gristle to chew on as they catalogued their toenail clippings.