P is Progressive, I is Interlaced. The number refers to the vertical resolution, but if it's interlaced you only really get half of that.. so, 480p is like 640x480 on your computer, 480i is like extra fuzzy 320x240. (OK so maybe I oversimplified some of that, but you get the idea right?)
1080i is a high enough resolution that it's better than 480p, even though it's interlaced, but it still can't beat 720p. Unfortunately the GC can't output anything higher than 480p.