As stated by others a 120Hz HDTV is different from a 120Hz monitor.
A 120Hz monitor requires a connection that can provide 60Hz + 60Hz input for monitor. That is done thru a dual-DVI connection, DisplayPort or HDMI 1.4a (correct me if I am wrong). The each 60Hz connection drives half the screen (half the resolution) which is why a 120Hz monitor can display up to 120 FPS; assuming the graphics card is powerful enough to pump out that many FPS.
A 120Hz HDTV only has 60Hz inputs, therefore it can only receive at most 60 FPS from a graphics card even if the graphics card is powerful enough to pump out 150 FPS. 120Hz monitors does some video post processing; generically it is called video interpolation. This is basically to smooth out video playback of movies. If curious continue reading (or if you have trouble falling asleep...), otherwise you can stop here.
The purpose of video interpolation is to reduce possible video stuttering that some people may see (which depends on how the brain processes the images sent to it via your eyes). In the US broadcast TV is basically recorded at 30 frames per second (29.97 to be a little more precise). 30 FPS divides into 60Hz evenly; each frame is displayed for 2Hz. The problem comes when watching a movie. Movies in the US are filmed at 24 FPS (23.976 to be more precise).
24 frames does not divide evenly into 60Hz; 60 divided by 24 equals 2.5. That basically means 13 frames are displayed for 2Hz each and 11 frames are displayed for 3Hz (total is 59 frames). It is this difference in the display time that can cause video to stutter since some frames are display longer than others. Pumping up the output to 120Hz smooths out the video of movies and it does no harm to broadcast TV programs because 120Hz is evenly divided by 30 and 24.
Video interpolation take two actual frames to create an interpolated 3rd frame and inserts it in between the two real frames this is great for movies because it makes everything playback smoothly. However, it is bad for games. The HDTV can perform this video interpolation very quickly, but it still takes a little bit of time to do so. This "time" is referred to a lag and can be an issue when playing fast paced games because it increases the time (by a tiny amount) it take for the actions on the mouse / keyboard / controller to be reflected on the screen. Kinda like you shot your gun and a half second later the bullet shoots out of the barrel of the gun.
.
.
.
Are you asleep yet?