If the iPad 2 is not HD, why does Apple advertise them as able to watch HD movies?
I imagine this is a wording thing, there is a difference between benig able to "watch HD movies" and "watch movies in HD".  The iPad can take a HD source, and scale it to display.  Commonly (although not officially) HD modes can be denoted by their number of scan lines (720p = 720 progressive, or non-interlaced, horizontal rows of pixels), and in this case the iPad 2 has 768 rows.