PlayStation Knowledge Center
The PlayStation 2 system will support audio technology such as Dolby Digital and DTS. To playback sound recorded on your DVD/software in Dolby Digital (AC-3) or DTS format to reproduce the effect of listening in a movie theater or concert hall, you must connect to audio equipment with the ability to decode DTS or Dolby Digital sound (sold separately). You must connect the component via the DIGITAL OUT (OPTICAL) connector using an optical digital cable (sold separately).
When you connect to an audio component with a built in DTS or Dolby Digital decoder set the "DIGITAL OUT (OPTICAL) to "On" in the "System Configuration."
To utilize the "DIGITAL OUT (OPTICAL)" feature of the PlayStation 2 console, you should plug in the "Video" connectors only ("Yellow" for Composite AV Cables, "S-Video" for S-Video Cable, or "Red, Green, and Blue" for Component AV Cables). You should also disconnect the Left and Right Audio (white and red) connectors that may be installed into your television/stereo. Every setup can vary depending upon the make and model of your equipment, so there may be exceptions to this. One such example would be when you may be using an RFU adapter to relay the video and sound information to the television.