Component video switching means that the receiver has two component video inputs and one component video output. Component video is the video connection one step up from S-Video, and it uses three video cables. It is also important today to make sure that component video switching supports HDTV bandwidth requirements. If you have a TV with component video inputs and you have two devices with component video outputs, you can use the receiver to switch between those component inputs. If you don't have component video capability, it's not of much use.
The differences between 5.1, 6.1, and 7.1? Hoo, boy... Here's a basic summary.
The original Dolby AC-3 (now Dolby Digital) was true 5.1 -- left main, right main, center, left surround, and right surround all discrete and full-range, plus a frequency-limited LFE (low frequency effects) channel for the sub. DTS does the same thing, but claims to provide superior sound by avoiding compression. Dolby and THX got together and created "7.1" with Dolby Digital EX / THX-EX (different names for essentially the same thing, although DD-EX was only available in theaters until a month or so ago). They added a pair of "center" surround or rear speakers, thus the 7.1. In reality, this "7.1" initially sent the same signal to both new speakers, so you do see some mention of 6.1 with the two speakers merged into one. The Outlaw 1050 does this: because they couldn't license DD-EX and didn't want to pay the cost for THX-EX, they got together with Zoran and developed a way to mimic DD-EX. This was possible because Dolby was actually borrowing some technology from the old Pro-Logic days and matrixing the center surround channel into the left and right surrounds. DTS has since come along and done the same thing, adding a center surround channel. DTS actually does it two ways, I believe -- one with the new channel matrixed into the surrounds, and one with the new channel being truly discrete (stored separately from the surrounds). To be honest, I haven't tried to keep up with which systems actually provide different signals to each of the new "rear" speakers in 7.1, so I tend to lump 6.1 and 7.1 together (that may be because I've only got one dipole "rear" speaker, so it all may as well be 6.1 for me).
Whew! That was all just sort of "off the cuff," so it's not particularly official or anything. Was it confusing enough?
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Gonk