For home-theater enthusiasts, it's been well integrated into the common mindset that HDMI is the best option for delivering high resolution audio. The original PS3 in particular needed HDMI to transmit high resolution LPCM multi-channel audio, and optical users were left to choose between either stereo LPCM or legacy digital 5.1 formats. Even so, not all audio devices can accept an HDMI signal. And whether it's a brand new sound bar or a ten year-old reference quality receiver, there are now multiple ways to get connected with high-quality DTS sound.
In recognition of this state of widely available HDMI and/or optical connections and products featuring legacy DTS decoders, the next-gen consoles can use their built-in DTS-HD transcoding solution to encode whatever raw LPCM signal the software or media is outputting, into a signal optimized to take advantage of whatever DTS decoding capabilities are found on the other end.
This trick of encoded native sound fields is usually reserved for PCs, where the HDMI connection is not always a given, and products like DTS Connect are used to maximize the optical connection between the PC and the receiver.
For those users connecting a PS4 to a DTS receiver through either optical or HDMI, they will need change the Audio Format (Priority) setting to Bitstream (DTS) from the Settings> Sound and Screen> Audio Output Settings menu in order to take advantage of the DTS-HD transcoding.
Bear in mind, in the case of the PS4, the Blu-ray sound output setting is separate from the global system setting and can be adjusted from within the Blu-ray playback settings.
On the Xbox One, users can select DTS Digital Surround for HDMI in the Settings> Display & Sound> HDMI audio menu and for optical in the Settings> Display & Sound> Optical audio menu.
There are some other benefits from using the Bitstream (DTS) output. Since having this setting enabled allows all audio coming from the PS4 to be transcoded to DTS-HD in real-time, users should never suffer from the sound drops on their audio systems, normally associated with changing sound formats.
Another benefit to going the way of DTS-HD encoding, is that whichever receiver or integrated system (sound bar) charged with decoding the DTS bitstream has been engineered with DTS decoding as part of its design and thereby the playback will be optimized for the sound equipment in question.
So while HDMI is the ideal way to carry audio from the next-gen systems, those that have to rely on the optical connection will be getting sound capabilities beyond what optical was capable of a decade ago.
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