Oh, good, we're back to justifying technical limitations with fabricated myths from early 2000s console marketing teams.
Also depends on context a lot - on a 7" screen it might be hard to notice the difference, but you can easily tell apart 120hz on a large monitor or in VR.
I think this is an oversimplification. We can detect latency, meaning a difference between input and screen response, at around 13ms.
But that doesn't equate to a new frame every 13ms being perfect, latency-wise. First, it ignores all the other sources of latency such as from input devices. Assume 6ms latency on the controller, that means you have to get a new frame out within 7ms from receiving the controller input.
That aside, there's a lot more than latency involved in creating beautiful smooth images on screen. For example, humans can detect visual change unrelated to input at about 500hz or even higher, especially in grayscale. I've heard that about 0.5m, or 2000hz, gray to gray is about the limit at which further improvements would be meaningless.
Of course the law of diminishing returns applies here. The fastest screen I've tested is 360hz and I can't say that I see any benefits over a 144hz screen, although I can see the difference in artificial benchmarks on blur busters.
In practicality, most people can't tell the difference between 40fps and 60fps, or at least won't notice it in normal gameplay.
So you get nearly the same experience as 60fps but for much less processing power and therefore also better battery life, less fan noise/cooling, and you can crank graphics a little higher.
Most people are more likely to notice the difference between "Medium" and "High" very easily or "High" and "Very High", but won't notice the impact of 40fps vs 60fps. So that's why 40fps is generally a sweet spot between performance and experience.