Blu-ray Disc players have several audio and video output setting options, depending on how you have your player physically connected to your home theater receiver.
If you have your Blu-ray Disc player connected to your home theater receiver via HDMI, there are two main audio output settings available: Bitstream and PCM (aka LPCM). In terms of actual audio quality, whether you have your Blu-ray disc player's HDMI audio output set to PCM or Bitstream doesn't matter. However, here is what happens when you choose either setting:
The PCM Option
If you set the Blu-ray Disc player player to output audio as PCM, the player will perform the audio decoding of all Dolby/Dolby TrueHD and DTS/DTS-HD Master Audio - related soundtracks internally and send the decoded audio signal in uncompressed form to your home theater receiver. As a result, your home theater receiver will not have to perform any additional audio decoding before the audio is sent through the amplifier section and the speakers. With this option, the home theater receiver will display the term "PCM" on its front panel display.
The Bistream Option
If you select Bitstream as the HDMI audio output setting of your Blu-ray player, the player will bypass its own internal Dolby and DTS audio decoders and send the undecoded signal to your HDMI-connected home theater receiver. With this setting, the home theater receiver will do all the audio decoding of the incoming signal. As a result, in this case, the receiver will display Dolby, Dolby TrueHD, DTS, DTS-HD Master Audio, etc... on its front panel display depending on which type of bitstream signal is being decoded.
You have the choice as to which setting to use, and as mentioned above, either setting should yield the same audio quality. However, there is another factor to take into consideration as to which setting that might be best for your to use. This involves access to secondary soundtracks, such as audio commentaries, descriptive audio, or other other supplementary audio tracks. If access to these audio features is important to you, then keeping the Blu-ray player set for the PCM audio output option might be best the best option for you. On the other hand, you can always make the switch from Bitstream to PCM anytime you wish by going into the appropriate menu settings.
BD Secondary Audio Setting
An additional setting option that may be available on your Blu-ray Disc player is "BD-Secondary Audio". Using this setting combines both the main high-resolution audio (Dolby TrueHD or DTS-HD Master Audio) signal with the secondary audio signal - However, if using this setting, the Blu-ray disc player will "downres" the Dolby TrueHD or DTS-HD to standard Dolby Digital or DTS in order to be able to squeeze both types of audio signals into the same bandwidth via bitstream. In this case your home theater receiver will recognize the signal as standard Dolby Digital and decode appropriately.
HDMI vs Digital Optical/Coaxial Connections
Also, if you are using either the digital optical or digital coaxial connection option from your Blu-ray disc player to your home theater receiver (handy if your home theater receiver does not have HDMI connections), you can also select PCM or Bitstream output options as well for those connections. However, in this case, the while the Bitstream output option can send a Dolby Digital or DTS 5.1 surround sound signal to your receiver for further decoding, the PCM option will only send a two-channel signal. The reason for this is that a digital optical or digital coaxial cable does not have the sufficient bandwidth capacity to transfer a decoded, uncompressed, full surround surround audio signal like an HDMI connection can.
For more information on accessing audio from a Blu-ray Disc player, also read: Five Ways To Get Audio From a Blu-ray Disc Player