In summary, Dolby Digital is an audio codec that encodes up to 5.1 discrete channels that can then be played back, or decoded, for surround sound. Most of us have probably heard the term Dolby Digital and may have associated it somehow with surround sound, but may not have known exactly what it is or does.
Dolby Digital became the standard audio for the DVD and has been adopted by most broadcasters, which helped define the home theater setup as we know it today - front left and right speakers, a center speaker primarily for dialogue, surround left and right speakers for ambiance, and the low frequency effects (LFE) channel for better bass. Most, if not all, DVD players decode Dolby Digital audio to allow playback on 5 speakers and 1 subwoofer (hence 5.1 as the LFE channel is not a full range channel - usually below 100Hz) as discrete channels of information. The decoded audio information flows from the DVD player to the A/V receiver (AVR) and then to the 5.1 speaker system for surround sound. The surround experience could be possible without Dolby Digital, but the storage space required would exceed what could be included on a single DVD. Dolby Digital, also know as AC3, is a compression of that audio without losing the discrete channel information and requiring much less storage. For more details and specifications click here.
What to look for: Look for the Dolby Digital logo on any consumer electronics device you purchase to ensure it will be capable of 5.1 surround sound playback. Devices include DVD players, AVRs, TVs, satellite receivers, cable receivers, portable DVD players, and more.
Dolby has expanded its technologies for even greater sound quality with today's high definition formats, such as Blu-ray. More about that later.