I believe the only reason for 120Hz anything is for Stereoscopic imaging
Very good point, didn't even occur to me in my earlier post. It's so underused... would be nice if that changes. I do love 'real' 3D.
Another thing that really is a bit tangential from what the OP was asking is how fps relates to the main game loop. 120 'frames' per second could actually have real gameplay consequences if your main game loop updates the game world and reads player input once per loop, even if those new inputs/computations are only displayed at the refresh rate of the display. I.E. a Street Fighter game that 'displays' 60fps but actually samples player input 120 times a second could have serious reprocussions if it wasn't programmed to take that into account. Of course, any game engine programmer who doesn't take these things into account isn't worth his weight in shit.
120 FPS is good because it ensures that the game will always run at a minimum of 60fps when VSYNC is enabled.
That's a kind of weird argument, and doesn't really make much sense. There's no reason a game that regularly runs at 120fps couldn't dip down below 60 updates in a second, provided something is truely clobbering the CPU or GPU. It's not like there's some arbitrary rule that says that any given rendering code can't drop below half of it's target frame rate. If you're trying to say that it would have more 'overhead' to prevent dropping below 60fps... that's kind of true. It really all depends on how things are coded. It's just as easy to have extra CPU/VPU cycles without ever updating the buffer (thus having an 'overhead' while still 'running' at 60fps). Ultimately 60fps is pretty arbitrary.