PCM is the digital audio format that home entertainment equipment is designed to process. Multichannel PCM soundtracks are quite large. So, studios use compression codecs such as DD 5.1 and DTS to save space on discs. The encoder takes a large PCM file and shrinks it using one of those codecs. The processing equipment must use the corresponding decoder to decompress the file, turning it back into PCM. If the disc has a DD 5.1 track, then you must use a DD 5.1 decoder in your receiver. The same goes for DTS sources. Fortunately, the AVR software takes care of that for you. It knows which decoder to use.
The other modes you've mentioned are called DSPs (digital signal processors). They are applied to PCM to alter it in some way. DSPs are useful with stereo sources. ProLogic II, for example, does a good job of expanding stereo to 5.1, moving dialog to the center channel and sound effects to the surrounds. PLII can't be used with DD 5.1 and DTS sources, since they are already 5.1.
I do not recommend using all channel stereo, which takes the signals in the two front channels and sends them to the other speakers. Not good. Voices that should be in front also play in the surrounds.
