Home theater receivers are the brains and muscle of your home theater system. They provide processing, switching and amplification. Just about every other component in your home theater system will be somehow connected to your receiver. Sometimes the receiver is just called an amplifier because it provides several channels of amplification to the speakers, but amplifier is just one job performed by the receiver.
Receivers replace the following components:
surround sound formats and will convert digital audio signals to analogue. There are many surround formats and it's necessary to know which formats your receiver can decode. Most receivers today can decode the popular important formats like Dolby Digital and DTS and are backward-compatible to older surround formats like Dolby Pro Logic.
Decoding surround formats requires that you use your DVD player's digital output. A single cable (toslink or digital coax) will run from the DVD player to the receiver's digital input, carrying a stream of 1s and 0s for your receiver to decode.
One of the most important jobs of the receiver is switching and volume control. The receiver is responsible for switching between all the different components you have connected and can regulate volume from the amplifiers.
It's important to know how many inputs and outputs you'll require when buying a receiver and whether or not it can handle the formats your other components require.
The best part about the receiver's switching capabilities is it can all be controlled from the couch by remote control!