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Ok, anytime you use a stereo connection (aka RCA cables), you get simulated surround sound (a stereo connection only sends two channels obviously). Using an optical cable is the only way to get true digital surround sound (since it sends the data as light, it moves it fast enough to send the signal to each individual speaker, this no longer uses the receivers' internal converter). And no, you would hook the optical out, into the optical in on your receiver.
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