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I'm interesting in running OpenELEC on a Raspberry PI as it would be a cheap XBMC solution. The OpenELEC Raspberry PI/FAQ notes:

The RPi cannot decode DTS and AC3 because of the overhead, it is recommended that you use a passthrough device with these files.

The OpenELEC XBMC Settings wiki notes:

Passthrough output device

This device you use to play the encoded formats, these are any of the formats checked above in the "capable receiver" options.

I'm still not 100% sure what this means. The screenshot indicates that the Passthrough device would be through HDMI.

So basically I want someone to confirm to me that the Raspberry Pi would be able to play videos on OpenELEC but not decode the AC3/DTS sound itself but it could send it over the HDMI cable to my TV to let my TV decode it. My TV is able to play AC3/DTS over HDMI if I connect my laptop and also plays video's with AC3/DTS from a USB stick so I should be in the clear if I'd enable the passthrough option?

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In short, yes, the Raspberry Pi is able to do that.

The passthrough device is when XBMC doesn't decode the audio bitstream. It passes the audio information through to something downstream to decode and then convert to analog to put out to the speakers.

So if it's a DTS or AC3 (Dolby Digital) soundtrack, XBMC just passes that information along to your receiver or TV to deal with. That's why you can check or uncheck DTS and AC3 capable receiver. If your downstream equipment is capable of decoding the audio information, and you have a passthrough device enabled, XBMC will just push the encoded bits through.

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