It's not about screen resolution, it's about being able to stream 1080p. Up until this update, if you had a 1080p movie in iTunes, the Video app would not see it (as if it wasn't there). If you synched it to the iPad, it would show it as a watchable video and play just fine. But for streaming, it was invisible.
If you retagged at 1080p video as 720p, it would see it for streaming (even though it was still a 1080p video). So just the tag seemed to make a difference for this particular bug. With this update, that bug is fixed. Now it sees 1080p videos for streaming. And they play just fine.
Yes, on a Mini- which doesn't have 1920x1080 pixels- it is not displaying full 1080p (it is down-converting it to 1024x768). But the key is that it can play 1080p files so we don't have to make special copies for this iPad (or use tag trickery). One master file fits all now.
I hope that clarifies things. The win for iOS users is an extra bug is fixed in the Video app. The win for Android tablets is that some of them have higher resolution than iPad Mini (for now).