Shell, you are correct. Bypass is only good for analog (RCA red and white) connections. As to which sounds better depends greatly on what you prefer. By using a digital connection you are letting the 950 process the information and when using Analog Bypass you are letting the cd/dvd player process the information and the 950 is used only for volume control. This is what you should use if you have a high end player. Try them both out and see what you prefer. Personally I use analog bypass for music.