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.

6.1 or 7.1 Setup
The most advanced home theater systems feature six (with Center Back) or seven (with Left Back and Right Back) full-range channels that allow viewers to take advantage of Dolby Digital EX soundtracks and Dolby Pro Logic®; IIx matrix-surround decoding technology. Both of these processes add surround information for greater realism and more dramatic effects.

Speaker Placement Tips
Of course, it's not always possible to place your speakers exactly as shown in our diagrams. The diagrams give a range of placement angles, so you have some flexibility. Sometimes you'll have no choice but to mount the surrounds directly behind you, but if you follow the guidelines as closely as you can, you'll have good sound.

Ideally, your front speakers, high-frequency drivers, or tweeters should be positioned at ear level (when you're seated). Our recommended height for the surrounds is above ear level, as soundtracks are likely to be optimized for that location.

Beyond keeping it on the floor, there's no specific rule for placing the subwoofer, as bass sound is nondirectional. However, the amount of bass may vary depending on room location. You might want to try a few different places to determine what's best for you (sometimes moving the speaker even a few inches can change the sound).

Speaker Shopping Tips
Most speaker manufacturers offer complete home theater systems, usually based on a satellite/subwoofer configuration. You're assured of speakers that match sonically (and cosmetically). Generally, the satellite speakers in these systems are shielded, so they can be placed close to your TV set. If your stereo speakers are not shielded, don't place them too close to the TV. (They're too close if the picture starts to distort.)

If you're expanding a stereo system and want to keep the speakers you have, try to stick with the manufacturer of your current speakers when you choose your subwoofer and Center and surround speakers. Most speaker manufacturers can offer advice on complementary models.

Room Acoustics
The shape of your room and how it's furnished will affect the sound you hear. For instance, too many bare surfaces can cause reflections that may add harshness to the sound. Adding carpeting and drapes can help.

If you have a choice of rooms, avoid ones that are perfectly square or have one dimension exactly twice another. These rooms can aggravate resonances that color the sound.

If possible, center your seating area between the surround speakers.

The closer you place a speaker to intersecting room surfaces (corners, wall and ceiling, wall and floor), the stronger the bass output. This can help bass-shy speakers, but it can also add too much bass. Again, just moving a speaker a few inches can often make a big difference in sound.

Graphical guide from dolby labs can be accessed at
http://www.dolby.com/consumer/home_entertainment/roomlayout2.html