what does dolby system mean and how does it work?

The best information I found was at WikiPedia: Dolby Stereo is a system designed by Dolby Labs in the '70s for creating

better movie sound, including surround-sound. The other benefits are

increased directionality of front sounds and improved localization of

on-screen sounds like dialog for the people sitting on the edges. The

system is totally separate from Dolby noise-reduction systems like Dolby B

and C. Remember that there is only one encoding process: Dolby Stereo,

which can be decoded by a Dolby Surround, Dolby Pro-Logic, or THX

decoder, for varying degrees of home-theatre "quality."

There are four output channels in Dolby Stereo: Left front, Right front,

Center front, and Surround. These are encoded on two channels in such a

way that the soundtrack can be played back on a standard stereo device, a

mono device, or a Dolby decoder. (Or a THX system, which is a Dolby

Pro-Logic decoder with specifications licensed by Lucasfilm).

A word is in order about THX. It is NOT different from Dolby Pro-Logic, at

least not precisely. THX is a licensing and quality-control wing of

LucasArts with the stated aim of improving movie sound and picture. It

licenses the name THX for movie equipment, movie theatres, home equipment,

and laserdiscs. The name means that the THX engineers certify it as good

quality. There are a few processing steps in home THX that are not