Source - Dolby Labs
5.1 Setup
This system has six channels: five full-range channels, and a low-frequency effects channel (the .1 of 5.1) usually expressed through a subwoofer. Many DVDs and digital broadcasts feature a Dolby® Digital (5.1) soundtrack, so this will give you optimum sound for most programming. It also most closely approximates the sound in most cinemas.

Home Theatre buyers guide.Among the many characteristics that define an audio system, only a relatively small number are really important to making a good buying decision. Here are the key specifications for a home theater audio system. We've divided them into three groups: important, somewhat important, and minor.
Surround Decoding
The surround-sound formats supported by the system will affect the realism and intensity of the experience.
Dolby Pro Logic: base-level surround decoding that will work with essentially any source. Generates front left and right, center, and surround outputs (with the mono surround output normally reproduced through two speakers). Works well only with Dolby Surround-encoded soundtracks. This or Dolby Pro Logic II is an essential feature.
Dolby Pro Logic II: an advanced version of Dolby Pro Logic that is starting to come into wide use. It provides superior surround decoding with stereo surround output.

When you buy a DVD for a Home theretre system it will be always confusing which sound format to select. In some cases movie makers release both versions together. But again you will be confused which sound format to be selected to get perfect sound effect to enjoy maximum out of your investment. Here is a comparison study by expert Andrew Ghigo.

Dolby Digital and DTS Digital Surround - Identifying the main differences between these multichannel sound formats

Many audiophiles and home theater enthusiasts argue that DTS surround sound formats can deliver higher quality audio in comparison to their corresponding Dolby formats, with improved dynamic range, better representation of subtle detail in audio content, and improved signal-to-noise ratio.

Partly, this reasoning arises because DTS surround sound is usually encoded at a higher data rate than Dolby Digital and its lineup of associated formats.

This is more than understandable. We are dealing with lossy compression techniques. A higher bit-rate for the same format should normally implies superior sound during playback, as less compression in the encoding process should..