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The funny thing about Virtual Dolby and other "pseudo-surround" methods for reproducing Dolby Surround is that they are not always as good at giving you virtual surround as the raw stereo signal itself.
In Dolby Surround, the surround channel is embedded into the 2-channel stereo signal by shifting the sound out-of-phase between the channels. This results in it being opposite in left and right, and that's what the decoder recognizes it by. But it also has a nice psychoacoustic side-effect, which is that the brain perceives out-of-phase sounds as coming from behind. So, even when left unencoded, you do get a virtual surround effect from Dolby Surround material.
You can even get a surround effect from undecoded Dolby Surround using headphones.
On DVD's in Dolby Digital 5.1, the sound is usually encoded so that it can be downmixed into Dolby Surround by the DVD player. To do this, you have to set your DVD player's sound output to something exceptionally obvious, like "Lt/Rt", "D.Sur.Dwnmx" or "DPL comp.". (I love DVD players. They're like little text-based computer games.)
What Virtual Dolby does is decode the sound using Dolby Pro Logic, and then remix the decoded surround signal back into left and right. The only difference is that the surround content is not quite as out-of-phase as before, it's gone through some filtering, and it may be delayed by a few milliseconds. This is proper, but might end up giving you a less distinct virtual surround field than raw, undecoded Dolby Surround.
I have experienced this a lot with Dolby Pro Logic. I was never quite happy with its performance because it is unstable by nature, more or less depending on the particular decoder. A few times I was amazed however at how good a surround effect I got, only to realize I had actually forgotten to turn Dolby Pro Logic on...
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