You haven't experienced a movie until you hear it in surround sound.
What Is Surround Sound?
Surround sound refers to the use of multiple audio tracks to envelop the movie watching or music listening audience, making them feel like they're in the middle of the action or concert. The surround sound movie soundtrack allows the audience to hear sounds coming from all around them, and plays a large part in realizing what movie makers call "suspended disbelief". "Suspended disbelief" is when the audience is completely captivated by the movie experience and is no longer aware of their real-world surroundings.
True surround sound formats rely on dedicated speakers that literally and physically surround the audience. There is one center speaker which carries most of the dialog (since the actors usually speak while making their on-screen appearance), and part of the soundtrack. There are left and right front speakers that carry most of the soundtrack (music and sound effects), and may carry parts of the dialog (when the director wants to intentionally off-set the source of the dialog to either side, from its default dead-center screen location). There is a pair of surround sound speakers that is placed to the side (and slightly above) of the audience to provide the surround sound and ambient effects. Finally, a subwoofer can be used to reproduce the low and very low frequency effects (LFE) that come with certain movies (e.g., the foot-stomping bass effects in "Jurassic Park" and "Godzilla").
A typical surround sound home theater system
There are virtual surround sound algorithms (e.g., Sound Retrieval System [SRS] and other proprietary algorithms) that make use of only two left and right speakers and psycho-acoustics effects to emulate true surround sound formats. While we think the result is a more expansive soundstage with better ambiance, we have not heard a virtual surround sound implementation that comes anywhere close to resembling a true surround sound system.
The focus here is only on the true surround sound formats, i.e., those that rely of multiple dedicated speakers.
Dolby Digital™
Dolby Digital (formerly known as Dolby AC-3, where AC-3 is short for audio coding 3) is the de facto surround sound standard in today's home theaters. Not only is Dolby Digital the standard for DVD-Video, but it is also part of the new High Definition TV (HDTV) standard. The Dolby Digital surround sound format provides up to five discrete (independent) channels (center, left, right, surround left, surround right; giving it the "5" designation) of full frequency effects (from 20 Hz to 20,000 Hz), plus an optional sixth channel dedicated for low frequency effects (LFE), usually reserved for the subwoofer speaker. The low frequency effects channel gives Dolby Digital the ".1" designation. The ".1" signifies that the sixth channel is not full frequency, as it contains only deep bass frequencies (3 Hz to 120 Hz).
Dolby Digital is a lossy audio encoding scheme that supports up to 5.1 channels of discrete audio. In actuality, a Dolby Digital soundtrack may be composed of less than 5.1 channels. For example, Dolby Digital 1.0 is mono audio (single track of audio information), while Dolby Digital 2.0 is stereo (in which Dolby Surround or Dolby Surround Pro-Logic can be encoded). Dolby Digital 4.0 have discrete audio signals for the center, left, and right channels, plus a mono audio signal that is common for the surround channels. Dolby Digital 5.0 is like Dolby Digital 5.1, but lacks a discrete audio signal for the low frequency effects channel. Dolby Digital encodes these multi-channel soundtracks at either the 448 kbit/sec or 384 kbit/sec data rates.
Keep in mind that "Dolby Digital" does not necessarily equate to "Dolby Digital 5.1". "Dolby Digital" generically refers to the encoding scheme as discussed in the paragraph above. Only when it says "Dolby Digital 5.1" explicitly can you be sure that the soundtrack consists of 5.1 discrete channels.
To take advantage of Dolby Digital surround sound, you must have either:
(1) Dolby Digital decoder in the DVD player and a "Dolby Digital ready" receiver or pre-amplifier, or
(2) Dolby Digital receiver or pre-amplifier and use the DVD player's digital audio output.
(This option is generally better since it allows the DVD player to pass the raw digital audio signal to the receiver or
pre-amplifier, which theoretically is less subject to interference and degradation.)
DTS Digital Surround™
DTS uses higher data rates (1.5 Mbit/sec or 754 kbit/sec, which are almost twice to four times higher) to encode the 5.1 channels of surround sound information than Dolby Digital (448 kbit/sec or 384 kbit/sec), prompting many industry experts to claim that it is superior to Dolby Digital. Thanks to the new lower DTS data rate (i.e., the 754 kbit/sec data rate), some studios have begun to release DVD titles that feature both Dolby Digital 5.1 and DTS 5.1. 
Prior to the advent of the lower DTS data rate, DTS DVD titles featured the full DTS data rate (i.e., the 1.5 Mbit/sec data rate) soundtrack, a Dolby Surround 2.0 soundtrack (for backwards compatibility with non-DTS equipment), and few (if any) bonus material since capacity of the DVD was limited due to the "data hogging" full-rate DTS soundtrack.
To take advantage of DTS digital surround, you must have either configuration (A) or (B):
Configuration (A): DTS decoding in the receiver or preamplifier (this is the preferred configuration)
(1) a receiver or preamplifier with built-in DTS decoding (look for the "DTS" logo on the faceplate), and
(2) a DVD player with DTS digital output (look for the "DTS" or "DTS digital out" logo on the faceplate). Alternatively you can use a DVD player with DTS decoding built-in with its digital output (in which case you're not really using the decoder in the DVD player), and
(3) use an optical or coaxial digital audio interconnect to connect the DVD player to the receiver or preamplifier
Configuration (B): DTS decoding in the DVD player
(1) a "5.1-channel ready" receiver or preamplifier (with no DTS decoding) that has a set of 5.1-channel analog inputs, and
(2) a DVD player with built-in DTS decoding (look for the "DTS digital surround" logo on the faceplate and a set of 5.1-channel analog outputs on the back panel), and
(3) use six analog audio interconnects (i.e., three stereo RCA pairs) between the DVD player and the receiver or preamplifier
Extended Surround formats
Dolby Digital EX™, THX Surround EX™ & DTS Extended Surround™ (DTS-ES™)
The THX Surround EX format is jointly developed by Lucasfilm THX and Dolby Laboratories, and is the home theater version of "Dolby Digital Surround EX™", an Extended Surround sound format used by state-of-the-art movie theaters. Lucasfilm THX licenses the THX Surround EX format for use in receivers and preamplifiers. Dolby Laboratories has begun to license what is THX Surround EX under its own name, Dolby Digital EX™, for consumer home theater equipment.
THX Surround EX is the Extended Surround version of Dolby Digital 5.1, while DTS-ES is that of DTS 5.1. The difference between the new Extended Surround formats and their 5.1-channel surround sound counterparts is the addition of a surround back channel, whose corresponding speaker is placed behind the audience. This allows certain soundtrack effects to be presented behind the audience, thereby achieving more enveloping and complete 360° surround sound. (Remember that in the 5.1-channel surround sound formats, the surround speakers are placed one on each side of the audience - not behind them.)
Additionally, while the Extended Surround sound format calls for one surround back channel, two surround back speakers are generally recommended for better envelopment. Acknowledging this widely accepted industry position, some high-end receiver manufacturers have introduced "7.1-channel" capable receivers, with decoding and sometimes amplification for the two extra surround back channels.
Both THX Surround EX and DTS-ES Matrix surround sound encode the surround back channel information into the surround left and surround right channels (similar to the way the center channel is encoded for Dolby Surround Pro-Logic). This cross-channel encoding is referred to as matrix encoding, since the surround back channel is encoded and later decoded (or derived) from those of the surround left and surround right channels. Because of this matrix encoding scheme, the surround back channel is not a true discrete channel and is technically considered a 5.1- channel format. And for this reason, they are sometimes referred to as "Dolby Digital 5.1 EX" or "DTS 5.1 ES".
A true 6.1-channel format: DTS-ES Discrete 6.1
DTS-ES can optionally support a fully discrete surround back channel. That is, the surround back channel has it own data stream and is truly independent from those of the surround left and surround right channels. This true 6.1-channel format is appropriately called DTS-ES Discrete 6.1 (in contrast to its matrix counterpart, DTS-ES Matrix). And as with DTS-ES Matrix, this discrete format is better realized with two surround back speakers.
The Extended Surround formats are completely backwards-compatible with their 5.1-channel counterparts. That is, THX Surround EX is backwards compatible with Dolby Digital 5.1, and DTS-ES Matrix and DTS-ES Discrete 6.1 are backwards compatible with DTS 5.1. Additionally, DTS-ES Discrete 6.1 is backwards compatible with DTS-ES Matrix. In order to hear the matrix Extended Surround formats, you will need a THX Surround EX, DTS-ES Matrix, or a generic "6.1-channel" decoder in your receiver or preamplifier and use the digital audio output of your DVD player. To hear DTS-ES Discrete 6.1, you will need a DTS-ES Discrete 6.1 decoder in your receiver or preamplifier.
Dolby Surround 7.1
The typical movie theatre today is capable of playing only 5.1 channels of audio. Dolby® Surround 7.1 adds two new discrete channels to establish four distinct surround zones in the theatre for a more vivid and engaging moviegoing experience. With Dolby Surround 7.1, filmmakers now have greater control over the exact placement of each detail in their soundtracks resulting in more depth and more realism.
In addition to improving the side-to-side panning of sounds and sound localization, Dolby Surround 7.1 enhances audio definition and widens the listening sweet spot. So individual sounds are clearer and more distinct, and the seating area in which this superb surround sound experience can be enjoyed is greater. In other words, the full power of Dolby Surround 7.1 is not limited to a handful of seats in the center of the theatre. Its four surround zones incorporate the Left Surround and Right Surround of Dolby Digital 5.1 while adding new Back Surround Left and Back Surround Right zones.
Dolby Pro Logic
Dolby Pro Logic II was developed to allow a surround listening experience from stereo content. It delivers five full-range channels (including two surround channels) derived from spatial cues that occur naturally in stereo recordings, soundtracks, and broadcasts. 
Dolby Pro Logic II technology is also used by broadcasters to encode their stereo signals specifically for Pro Logic II playback. This makes it possible for them to deliver specific surround and localization effects over stereo services that are more like discrete 5.1 transmissions, without compromising regular stereo and mono playback. 
Later variations of Pro Logic II derive even more (up to 9.1) channels from stereo content. Pro Logic IIx adds back surround channels to the standard 5.1-channel configuration for 7.1 surround, while Pro Logic IIz adds two front height channels that can be used in addition to or instead of the back surrounds in a regular 7.1 setup.
In a 9.1-capable receiver or processor, Dolby Pro Logic IIz can expand channel lineup to provide a 9.1 listening environment that includes back surround and front height speakers.
Sources are from Wikipedia, Dolby Laboratories.
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