Yes, it's 1080p (slight scaling, but you wouldn't notice) and you can buy it off PSN or in stores. Basically a taster of what the full GT5 will be but it still has a lot of content.
Its actually a good method to get good graphics out of the console. True 1080p with lots of objects, high res textures,lighting and graphical fx is a lot to ask of the current gen hardware. The original GT:HD that came out on PSN was true 1920x1080p, but it had no FSAA and you could tell. The GT5 demo that came out on PSN is 1280x1080p and has 2x FSAA. So overall its a small trade off to get 2x FSAA which makes a big difference. Its not the same as Full screen to widescreen because the pixels are rendered narrow so when they are stretched out horizontally they are the correct aspect ratio. If you check out the GT5 demo the selection screen graphics are 1920x1080p with no FSAA and the game is 1280x1080p so you can see the difference 2xFSAA makes.