Basic Run-Down of How PCs Output Audio PCM is the uncompressed output format that most digital audio is encoded in. It can be stereo or multi-channel. Optical/Digital Coax(same signal, different cable) have some technical limitations with multi-channel PCM because they were originally designed as a stereo-only interconnect. Multi-channel audio through optical was a later addition to the technology and engineers had to use compression to make it work. Optical was designed with consumer-grade stereo equipment in mind, and optical surround was designed with compromises. Analog is limited in ability only by the PC's internal audio processing hardware and DAC, and by the quality of your cabling. The soundcard/software combo acts as your media source, decoder, effects/surround processor, encoder, DAC, and pre-amp all at once and in that order. It plays any audio in raw form, compressed or uncompressed. A receiver or PC speaker kit receiving analog audio only amplifies the signal and sends it to the speakers. When using digital formats, such as Coax, HDMI, or optical, you are still internally decoding to computer language and internally encoding to a PCM signal before output. Digital is different because it places the final Digital-to-Analog conversion on external hardware. This can mean a huge increase in quality if you have good audio hardware. You can further remove your PC from the equation with bitstreaming. Bitstreaming is sending a direct ones and zeros Dolby/DTS/ASIO signal through Optical or HDMI with the use of A/V software. It allows your compatible receiver/DAC or other piece of hardware to not only convert the sound to analog, but to decode the ones and zeros computer file entirely on its own. This almost entirely removes your PC's influence on sound quality, but is dependent on your external hardware's processing capabilities for function and compatibility. A/V receivers are designed with consumer hardware such as game consoles, CD players, and Blu Ray players in mind, not PCs. Sound cards often offer much more flexible and compatible sound processing for PC-based sources due to the use of more powerful software and more specialized hardware. They are also optimized for use with multi-channel PCM PC games, uncompressed PCM surround, and other PC-based sources. In short, they arguably have better capabilities with handling audio produced by a PC than dedicated external audio equipment. Sound cards are also starting to rival dedicated hardware in playback quality, and often match or beat dedicated DACs and headphone amplifiers. I'm talking only the best, newest sound cards currently available though. It's taken a log time for PC audio to catch up to home entertainment audio on the sound enthusiast side of things. Optical can only send uncompressed stereo or compressed multi-channel such as Dolby Digital and DTS. It can also only bitstream Dolby Digital, DTS, and ASIO stereo. That's the limit for its transmission capabilities. This means optical can't send the uncompressed multi-channel PCM surround from games or software-decoded movies without special software(see below) to compress the multiple channels. HDMI can send up to 8 channels of uncompressed PCM and additionally bitstream Dolby TrueHD and DTS-HD MA, but HDMI is sometimes problematic for PC->receiver connections. Video cards and A/V receivers are not ideal sound cards and the support is spotty. Dolby Digital Live/DTS: Connect are real-time software compression tools included with some soundchips that can compress any multi-channel audio and do their own form of bitstreaming. These tools are intended solely to expand the options for optical users. They work reliably for movies, but are hit and miss for games. About 50/50 or worse. Max Payne 3, for example, has no center channel in cutscenes, so is ruined. Dolby Digital and DTS use lossy compression the same as DDL and DTS:C so they fit perfectly within that format and lose nothing in the conversion. DTS-HD MA and Dolby TrueHD are both codecs with lossless compression and default to their lossy versions when you try to bitstream through optical. DDL and DTS:C can be used for the same effect, ie no better. Also, DDL and DTS:C require certain sound cards to work. The latest RealTek codecs are capable of it, but it's hidden at the driver level and inaccessible without a hacked driver. And cards that do support natively sometimes have only one or the other. What's the Actual Difference in Quality Between Lossy and Lossless Surround? Lossy -Dolby Digital Live: 640kbps max 6 channel 48KHz 16-bit -Dolby Digital 5.1: 640kbps max 6 channel 48KHz 16-bit -DTS Connect: 1.5mbps max 6 channel 48KHz 24-bit -DTS: 1.5mbps max 6 channel 48KHz 24-bit -No reliable solution for Lossy Multi-Channel PCM Lossless -Dolby TrueHD: 18mbps max 6 channel 192KHz/8 channel 96KHz 24-bit -DTS-HD Master Audio: 24.5mbps max 6 channel 192KHz/8 channel 96KHz 24-bit -PCM: 27mbps+ 6 channel 192KHz/8 Channel 96KHz 24-bit So you see, you lose quite a bit when you compress lossless surround to fit over an optical cable. Optical is great for stereo because its stereo quality is nearly unlimited. Pretty much perfect. But it's very outdated for modern surround applications. You need either a way to decode in software/hardware for an analog connection, which I have, or go the easier but more issue-prone route of HDMI. Some games also have lossless or near lossless audio quality so even if all games worked with DDL or DTS:C you're limiting some of them by using those modes. Normally with PC based audio, you pick one direction to go so cable choices are easy. My PC is needed for semi-serious HTPC, gaming, and entry-level audiophile use all at the same time. So analog is the only thing that covers all bases, but it takes the right combination of hardware to get truly nice analog sound from a PC. A high-end sound card expands my options. Audio and video are very tightly controlled industries, and there has never been an accepted universal standard for sound. Right now, analog with a good sound card is about the best PC output you can get without relying on expensive dedicated hardware. My receiver and speakers are entry-level in the audio world. Certainly not bad at all, but nothing special. So optical won't do me much good without say an external DAC(2 channel) + headphone amp, and then it's limited to stereo or badly gimped surround. The sound card has a set of pretty good DACs(for multiple channels) of a known type, a decent headphone amplifier, and still allows me PCM multi-channel without the constant HDMI headache. As a bonus it offers me Creative EAX support through the ALchemy software, which a decent number of older games support. X3, CoD2, FEAR, Diablo II, etc. Games I still play pretty regularly solo and with friends, and would like to have surround in.