What is the difference between digital audio formats?
The difference between digital audio formats can be boiled down to the number of speakers and the method used to decode the digital signal.

Note -- In all numerical formats the ".1" designates the subwoofer or low frequency channel.

5.1
5.1 digital surround sound is the most common configuration in home theater. It actually employs six speakers -- a center, two for left and right channels, two for the right and left rear channels and a powered subwoofer.

6.1
6.1 surround sound employs an additional center rear speaker to fill the gap between the right and left rear surround speakers. Its signal information is decoded and calculated by the receiver's logic circuitry due to the fact that DVD audio -- even HD systems -- only provide 6 audio signals.

7.1
7.1 digital audio incorporates an additional rear speaker/channel for a total of eight speakers. The additional speakers are more of a side fill for the rear as you now have a right and left side speaker and again have a right and left rear channels. 7.1 is usually most effective in large home theater rooms.

Decoding Methods
Dolby Laboratory's Dolby Digital and Dolby Pro-Logic are probably the most familiar formats currently available. Pro-Logic is more commonly utilized by television broadcasts and almost all DVD movies utilize Dolby Digital tracks.

A direct competitor to Dolby is DTS. Some audiophiles swear by DTS citing its claims of lower compression rates and a better signal to noise ratio. Unless you have really good audio gear and/or "golden ears" you probably will not notice a difference between Dolby Digital and DTS.

For more info on the difference between digital audio formats you may want to refer to the section on digital audio formats.