Contrary to popular belief, a target curve that is flat from 20 Hz to 20 kHz is not always the one that will produce the correct sound. There are several reasons for this including the fact that loudspeakers are much more directional at high frequencies than they are at low frequencies. This means that the balance of direct and room sound is very different at the high and low ends of the frequency spectrum.
The Audyssey Reference target curve setting (also called Movie in some products) makes the appropriate correction at high frequencies to alleviate this problem. A slight roll-off is introduced that restores the balance between direct and reflected sound.
The Audyssey Flat setting (also called Music in some products) uses the MultEQ filters in the same way as the Audyssey curve, but it does not apply a high frequency roll-off. This setting is appropriate for very small or highly treated rooms in which the listener is seated quite close to the loudspeakers. It is also recommended for all rooms when the receiver is in THX processing mode. This allows THX re-equalization to operate exactly as it was intended.
Some manufacturers have decided to implement a Bypass L/R (or Front) setting. This uses the MultEQ filters that were calculated for the entire listening area, but it does not apply any filtering to the front left and right loudspeakers. The average measured response from the front left and right loudspeakers is used as the target curve for the remaining loudspeakers in the system. The subwoofer in this case is equalized to flat as is the case for all the settings described above. This is not a setting recommended by Audyssey.
In some products, there is a Manual EQ setting. This is a traditional parametric equalizer that does not use the MultEQ filters or the Audyssey measurement process at all.