Bitstream simply means read the bits off the disc and send them as a stream without attempting to decode them. The receiver will then attempt to identify the type of stream and choose the appropriate decoder to make sense of them. You must use a digital connection (optical or coax, doesn't matter) and have the receiver's digital input configured correctly for it to work.
PCM stands for Pulse Code Modulation - it is the lowest common denominator in digital audio as it is essentially a 'raw' format. It's basically a sequence of numbers (samples) that represent the amplitude of the original analog signal from which it was sampled at various points in time (44,100 16 bit samples for each second of audio for the CD format, for example).
If you set the dvd player to PCM then:
- If using a digital connection, the player decodes the 5.1 mix and downmixes the 5.1 channels into 2 channel PCM (which is still digital). You would then have to use a matrix decoder like ProLogic II to turn it into 5.1, but it's not exactly the same as the discrete 5.1 mix.
- If using an analog connection, it decodes and downmixes to 2 channel PCM but then also does digital to analog conversion so you are sending an analog signal to the receiver.
