The old rules stated the proper seating distance was 7 to 9 times the picture height from a 480p TV. This was so you were close enough to see the scan lines. When newer (720p) TVs came out the had pixels instead of scan lines. For the most part the same rules were applied; except that you can sit closer since the resolution is better.
The new debate is now about HD or 1080p TVs. Some experts say with a TV playing a perfect source (BluRay) a person can sit as close as 3 times the display height. I’ve seen another report that says you can sit as close as 1.5 times the diagonal with a perfect source. That seems really close to me but I can understand a gamer using this calculation. (Math: Screen Diagonal x 0.49 = Screen Height)
At 5 times the picture height, the screen may appear a little smaller than you like, but your eyes won’t be able to pick up as much noise on the screen. Unless you are sitting closer than 9.8 feet to the new 50″ TV you’ve had your eyes on, the difference between 720p and 1080p won’t be apparent. Most people sit about 10 feet from the TV.
To figure out what size is best for your room, divide the seating distance by 5. This will give you the desired screen height. Divide the screen height by .49 will give you the screen diagonal. If you want a larger screen than your viewing distance is capable of, then you need to increase your resolution. A 65″ TV for 10 feet needs to be 1080p to compensate for the closer distance.Here’s a chart from CNET that requires no math. It’s calculations are for HDTV.