1) Optical and coaxial both carry digital audio, and you can connect either one. Component is for video. If your TV supports component, it is the connection to use. See the next answer for what to do if you don't have component inputs on your TV.

2) Composite video is the basic analog video connection. (The RF "coax" used for cable TV is a different beast, since it carries both audio and video.) S-video is a superior analog video connection, and since your TV has an s-video input I would recommend using it. Note that composite, s-video, and component are all purely analog video connections, unrelated to audio. (For more information on different home theater connections than you want to know about, try here for a little background.)

3) Video switching is the equivalent of going up to the TV and "switching" cables between devices. In some cases (such as with the composite or s-video switching sections of the 950), this can also include overlaying an onscreen display. Upconversion (or crossconversion) relates to taking one input type (such as composite) and passing it through to a different type of output (such as s-video). The 950 does allow for conversion between composite and s-video, but staying with the same connection type all the way through creates the best picture quality. HDTV can only use either component video or one of the new digital video interfaces (DVI and HDMI). I use my 950's component video switching for both of my progressive scan DVD sources (a DVD player and a DVD recorder) and connect my HD cable box directly to my HDTV with a DVI cable, and the results are excellent.