Circle Surround approaches surround sound in a unique way. While Dolby Digital and DTS approach surround sound from a precise directional standpoint (specific sounds emanating from specific speakers), Circle Surround emphasizes sound immersion.
To accomplish this, a normal 5.1 audio source is encoded down to two channels, then re-decoded back into 5.1 channels and redistributed back to the 5 speakers (plus subwoofer) in such a way as to create a more immersive sound without loosing the directionality of the original 5.1 channel source material. Also, Circle Surround can also expand two channel source material into a full 5.1 channel surround sound listening experience.
Circle Surround is now in its second generation, referred to as Circle Surround II, which expands the original Circle Surround listening environment from five to six channels. For additional details, refer to the Official SRS Circle Surround II Page