120 FPS is for slow motion. They can't use the whole sensor because the P4 camera system doesn't have the bandwidth to transfer 1920x1080 @ 120 frames per second.
When you select 1920 x 1080 @ 120 FPS, they get around the bandwidth issue by not using the whole sensor. This results in having less resolution than the normal 1080P and as a result the video isn't as sharp.
As far as I'm concerned, 120 FPS is a gimmick. They cobbled it together so they could add it as a feature. I find I can get the same quality slowing down video while post processing.