it will bypass the sub x-over, which depending on the capabilities of your speakers, may not be a good thing. it also bypasses bass and treble controls, any sort of EQ if it has audyssey or something like that, in analog reproduction it bypasses digital processing. it will bypass things like pro logic II or anything like that. it's not really necessary to use it. if your listening to an analog source like music thats not hooked up via toslink or coax etc. what normally happens is it's converted to digital, run through the x-over, eq if there is an eq, bass and treble controls pro logic II or other up-mixing fields etc, then re-converted back into analog, in direct mode, its pure analog. with digital it is just converted to analog right from the source, no processing. i would say don't use it because you need things like sub x-over. that's just my opinion. it's a useful function for satisfying "magic audiophiles" i think we all know whom (group) im referring to. this particular type of people are the ones who buy 1000 dollar wire.