These are actually good questions, and solid fundamental information on how all of this works can be very difficult to track down. The 970 will automatically switch to the proper decoding mode when it detects a new source, and this switch is entirely accurate - it has to be for you to get any sound at all, since PCM stereo and the different flavors of Dolby Digital and DTS each must be handled differently to produce the intended audio. When the 970's display sees a new signal, it will briefly display the incoming signal's format:
Dolby 2/0.0, for example, or
PCM 48khz or
Dolby 3/2.1.
When you see that "2/0.0" or other string of numbers, the 970 is telling you how many audio channels are present in a Dolby Digital or DTS bitstream. The first number (typically 2 or 3) relates to the front soundstage: 2 means stereo (left and right), while 3 means there is also a center channel as well. The second number (the one immediately after the "/") describes the surround channels: 2 means separate left and right surround signals, while a 0 means no surrounds and a 1 (which I wouldn't expect to see often) means a single mono surround channel that would be sent to both surround speakers. The last number (the 0 or 1 after the ".") refers to the LFE channel that is meant for the subwoofer. A 0 means that there's no LFE track, while a 1 means that there is.
After a few seconds, the 970 will switch to showing the actual processing mode being used to generate the output, which will include both the signal decoding if it's appropriate (such as Dolby Digital or DTS) and any additional processing (such as Pro Logic IIx or DTS NEO:6). Some of the processing in the 970 works only for decoding a specific signal - that would be Dolby Digital and DTS. Other processing is used to derive additional audio channels that don't explicitly exist in the original signal, which is done using matrix decoding modes such as Pro Logic II and NEO:6.
Typically, Pro Logic II Movie is listed as PLII-C for "Cinema" to differentiate it from "Music." In cases (such as Outlaw's 990) where the mode is spelled out completely, it is often listed as "Movie" and "Music," so it does get confusing. Since the 970's display is similar to that used on the Model 950, I'd suspect that if you see PLII-M you're getting the music form of Pro Logic II.
If you only have a 5.1 speaker setup, you are likely to still see Pro Logic IIx listed - II and IIx are the same basic animal, with IIx just adding the ability to handle surround back channels.
I've got a fair bit of detail written about surround modes
here and
here (pardon the repetition between the two), which may also help answer some lingering questions.