Under AVCHD Size, '1080p24/25>720p24/25' < What does it do?

I read the WIP manual and all the other guides here, but cannot seem to find any explanation of what this setting does (and how it does it). Sounds like it changes the 1080 mode to record in 720, but the comment in ptool says something about the corner being cropped. Could someone explain?
 
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