"Best for retina" isn't 1280x800. It's 2560x1600 (on the 13"), which is the native screen resolution.
Since the "retina" (aka HiDPI) mode uses double the number of pixels to draw the same things (buttons, text, windows, etc.) then the resulting image makes things the same physical size as a 1280x800 screen.
If you compare text at the same font size on the retina and non-retina MBPs, the text will be the same physical size on both but will be drawn with four times as many pixels on the retina model, giving it more detail.
That's why it says "Looks like 1280x800" in system preferences. Physical proportions are the same as 1280x800, but it is using all 2560x1600 pixels for detail.
On the 15" the native resolution is 2880x1800 and the "best for retina" resolution "looks like" 1440x900, but again it's really using all 2880x1800 pixels for detail.
If you've ever compared a retina and non-retina iPhone or iPad it's the same thing. More pixels, more detail, but things stay the same physical size. The Macbooks are a bit more complicated because you can choose other resolutions that let you fit more things on screen while sacrificing a bit of that super detail.