Buying a receiver is one of most important decisions you're going to have to make when building your home theater. The receiver has a number of functions including; connecting and switching audio sources; connecting and switching video sources; decoding surround sound formats; amplifying an audio signal and sending it to your speakers; tuning in to radio stations; and acting as interface between you and your home theater.
The first thing to think about is whether you want a receiver at all or would you be better off buying a separate decoder, amplifier, and tuner?
Despite being a more expensive route - not to mention extra space needed - separates do have some advantages. You can pick and choose your own combination of components, can upgrade each component individually and won't lose all functions if one piece develops a fault. On top of that, having each electronic component in a separate box does improve sound quality when compared with having them all on one circuit board.
However, separates route is more expensive, more complicated and needs more space than buying a receiver. And for most people its uneccessary. Today's receivers do a very good job in all of their functions.
So what should should you look out for when buying a receiver? The first thing is to make sure that it has ll inputs you need for equipment you need to connect to it. Sounds obvious, but its very easy to overlook. As a mimimum it should have digital audio inputs (optical and co-axial) for Dolby Digital and/or DTS. It should also have analogue audio inputs for CD player, set-top box and possibly DVD-Audio or Super Audio CD player (the last two currently don't have digital outputs in order to make it less easy to pirate CDs).