Digital Theater Systems Digital Surround is an audio encoding format similar to Dolby Digital. It requires a decoder, either in the player or in an external receiver.

Some people claim that because of its lower compression level DTS sounds better than Dolby Digital. Others claim there is no meaningfully perceptible difference, especially at the typical data rate of 768 kbps, which is 60% more than Dolby Digital. Because of the many variances in production, mixing, decoding, and reference levels, it's almost impossible to accurately compare the two formats (DTS usually produces a higher volume level, causing it to sound better in casual comparisons).

DTS originally did all encoding in house, but as of October 1999 DTS encoders are available for purchase. DTS titles are generally considered to be specialty items intended for audio enthusiasts. Most DTS are also  available in a Dolby Digital-only version.

DTS is an optional format on DVD. Contrary to uninformed claims, the DVD specification has included an ID code for DTS since 1996 (before the spec was even finalized). Because DTS was slow in releasing encoders and test discs, players made before mid 1998 (and many since) ignore DTS tracks. A few demo discs were created in 1997 by embedding DTS data into a PCM track (the same technique used with CDs and laserdiscs), and these are the only DTS DVD discs that work on all players.

New DTS-compatible players arrived in mid 1998, but theatrical DTS discs using the proper DTS audio stream ID did not appear until January 7, 1999 (they were originally scheduled to arrive in time for Christmas 1997). Mulan, a direct-to-video animation (not the Disney movie) with DTS soundtrack appeared in November 1998. DTS-compatible players carry an official "DTS Digital Out" logo.

Dolby Digital or PCM audio are required on 525/60 (NTSC) discs, and since both PCM and DTS together don't usually leave enough room for quality video encoding of a full-length movie, essentially every disc with a DTS soundtrack also carries a Dolby Digital soundtrack. This means that all DTS discs will work in all DVD players, but a DTS-compatible player and a DTS decoder are required to play the DTS soundtrack. DTS audio CDs work on all DVD players, since the DTS data is encapsulated into standard PCM tracks that are passed untouched to the digital audio output.