From MediaTwins :
AC3 format file may contain up to 6 audio channels. AC3 Decoder combines the information from these channels into two encoded channels, which deliver to each of your ears, via conventional stereo headphones, its own unique sum of direct and reflected sound from each virtual speaker. As a result, the listening sensation is much more natural, with sounds appearing "out-of-head" can be encoded into any supported by AC3 Decoder formats. The best surround-sound experience can be heard in headphones.