In desktop mode you can change the resolution of the connected display. It goes back to 720p if you go back to gaming mode, but you can always just launch games from the desktop if you want higher resolution for a specific game.
IIRC they also just recently launched a new setting that allows you to permanently set the target resolution for all games (this might still only be in the beta branch though).
Previously you had to go into each game's settings from Steam, and change the resolution there (which might be how you missed it).