Kannan:
Madbull, Spiro and other have answered some of your technical queries. What I am attempting to do is to give you a basic understanding of music and movie audio formats.
The number of channels in a music or movie score does not depend upon the technology - Dolby, MP3. FLAC, DTS, Neo3 or whatever you may call it. It depends upon two important factors - the number of microphones used during recording, and the number of channels used during mixing and transfer to master tape. All your CDs/DVDs are then cut from the master tape.
Most musical scores are recorded with just two microphones - one for the voice or main instrument, and one for all other instruments. Some advanced studios use multiple microphones - one for voice, one for drums, one for chorus, and even one for each type of instruments. The recordings are sent sent to an engineer, who first cleans each channel of all extraneous noises, and then carefully mixes these channels to create a two channel master tape. Generally what the engineer will try to attempt is to play the main voice or instrument dead centre and surround that with various instruments. Since the assumption is that music is usually played in a stereo system, even background music is played in both channels, albeit with varying degrees of amplitude to give you the off-centre feeling.
Thus, if you take a pure Rebook CD music piece and play it, irrespective of what technologies you use, you are listening to only two channels. What technologies such as Neo3 and others attempt is to play the same two channel audio in all the 5.1 channels, and play around with the frequency and amplitude settings for each channel to give you a feeling of getting surround sound. For example, if I limit the frequency to the right surround channel to be between 5,000Hz-10,000Hz, irrespective of what I am playing on that channel, you will hear only sound between these frequencies.
Movies are a different game. Surprisingly, there is hardly any audio recording done when the movie is being shot. For dialogues to be lip synced by the artists, a loudspeaker will be playing the dialogues or music. The actors will listen to these sounds and either dance or speak their words. Mind you, what the actors speak during the shooting is not recorded, or, even if recorded, is deleted later on. When the film is ready, the actor is called to the studio and asked to speak the same words again watching his or her own lips on a preview screen. This delivery of dialogues is the one that is recorded.
All other sounds such as music, crashes, bird sounds, etc, etc., are all created in the studio. Each of these sound will be completely devoid of any other collateral sound. These could be recorded in any number of independent channels, sometimes running to even 24 channels.
The movie director then sits with the sound engineer and mixes these independent sounds into either 6 (for 5.1) or 8 (for 7.1) channels. Each of these 6 or 8 channels will have completely independent sound and is encoded in one or more ways to specify the timing and channel. In the cinema hall or at home, a Dolby or DTS system will understand these encoding, decode the sound, amplify it, and send it to the appropriate channel for delivery.
Thus, whether you are using a music or movie audio, the closer you are to the way the original recording is done and what the artists or director intended, the more will be you enjoyment.
When you consider music as such, unless you go back to the original recording tapes, and remix them into multiple channels for surround sound format, you are only fooling yourself if you use any software to convert a two channel audio onto 5.1. As I said before, all these software do is to take the two channels, play then on all channels, and use frequency and amplitude variation to give you a surround feeling. Of course, many people enjoy such conversion. BUT, if you listen to a original 5.1 version of the same song recorded in a studio that has the original master tapes, then you will understand the difference.
Please do not be under the assumption that a file extension can magically change your audio. It cannot.
Cheers