Just as a heads up, finding optical cables sub $10 in B&M stores is short of impossible. (BLAST those laws of supply and demand). Anyhoo here's the dealie on these here fine cables. Many advance home audio receivers (safe way to check look to see if anywhere the magical words "Dolby Digital" appear...if it says "Pro-Logic" ONLY, alas you need to go burn some more money and buy a new receiver).
Pro-Logic was a system designed by the fine folks at Dolby to deliver a 4 channels of audio (Left, Center, Right, and ONE surround channel) out of a stereo mix (2 channels), through a very intellegent matrix system (the short of it is L+R is summed, this is extracted and sent to center channel, L-R is summed this is sent to surrounds...) This system allows for some "backwards" compatibility and can be delivered over analog signals (a pair of red and white RCA cables)...not to confuse you more, but yes Dolby Prologic (remeber folks this is a STEREO mix) can be sent over a digital bit-stream.
Anyhoo with the magic of LaserDiscs in the 80s Dolby AC-3 encoding came into play...later as DVDs took hold Dolby renamed it Dolby Digital. DolbyDigital is an ENCODING SCHEME not a Surround Sound Scheme. This is a VERY verstile system...the key is the audio signal remains in the digital domain as long as possible... Ahhh now the fun confusing part Dolby Digital does NOT mean Surround Sound. Remember Dolby Digital is VERSTILE! It can be used to deliver a DIGITAL BIT-STREAM of 1s and 0s representing either a mono (1 track), stereo (2 track), Dolby Pro-Logic (2 track, with 2 more matrixed imaginary tracks), Dolby 4-Point (L, R, RS, LS, 4 discrete channels), Dolby Stereo (L, R, C, 3 discrete channels), and our good friend 5.1 surround (L, R, C, RS, LS, SW, 6 DISCRETE channels). Yesh there are fun variants in between (DolbyEX Matrixed takes a 5.1 surround mix and pulls out a 6.1 mix for a Rear surround channel, this is matrixed, there is DolbyEX Discrete, which is a 6.1 discrete mix, and DTS which isn't Dolby related at all - cept for the fact that it TOO is a digital encoding scheme)
Yikes...thats a lot of rambling. But to try and tie this little dity up...modern home receivers can take this bit-stream tossed out by a variety of items (PS2s, XBoxen, CD Players, MiniDisc Players, DAT decks, yes even your PC) so that the signal remains in the digital domain as long as possible (theoriticly removing any chance of "added" sound). There are 2 ways to deliver a digital signal for home use (ok 3, but teh geeky folk holding on to LaserDisc players care about AC-3 RF...and if you do, well you should've written this into the thread so I woulnd't have to...) But yeah, digital signals can be delivered via optical or coax. Coax looks like nothing more than your standard RCA cable (most manufactures use an orange plug to indicate this input/output) - and yes you can use any run of the mill RCA cable to hook it up...as for if this makes a difference in sound, thats up to you to decide. This system has some strong supporters, but most home equipment now-a-day sports an optical connector. And well our fine Xboxen, PS2s, and LineDrive PCs all have this fine teenie tiny little jack (for those techno junkies, tis a TosLink jack). All you need is one cable to deliever from 1 to 7 discrete audio channels to your receiver.
Just as a heads up too natiely the Xbox supports Dolby Digital 5.1. The cool thing is audio is encoded ON THE FLY within the Xbox (try Halo, or Max Payne for good examples of how sound will pan around the channels depending on the direction your character faces), this was one of the big old features touted when the unit launched. Not ALL games deliever 5.1 though...but most do, almost all exclusive titles do, and most in teh future will. Also it'll pass along DolbyDigital or DTS audio bit-streams from DVDs if you have the DVD play-back kit. The downside yes you DO have to purchase a break-out box to get this DolbyDigital goodness via the Advance AV Pack, or the Component AV Pack (with the cable that ships, all you're getting is good ole analog stereo (and sometimes Pro-Logic) goodness. The PS2 on the otherhand, even though the optical port is BUILT-IN, natively games don't support DolbyDigital 5.1. Again for some confusion - the port was included for DVD Playback (all DVD players must somehow ahve the ability to export a digital bit-stream, tis part of the standard)...so yes watching movies with your PS2 you will get the full 5.1 DolbyDigital or DTS expereience. Game developers were ALSO given the option to PRE-ENCODE DolbyDigital passages in cut-scenes of their games...so taht cut-scenes would be full-on 5.1 Dolby Digital goodness...but the actual playing of the game yielded only a stereo (or pre-encoded Pro-Logic) mix. Then along comes EA, who figured out a sneaky back-door way to get the Emotion Engine inside the PS2 to encode discrete 5.1 on the fly...so weeeee with the 2002 sports series PS2 gamers now had real on-the-fly 6 channel discrete audio...the downside EA won't share how they did it with any other developers...so it only appears on EA Games:-(
YIKES this is getting long, anyhoo to the DEALS! $5 for an optical cable is infact quite a good deal. For those who are even cheaper bastards like I, can head over to _____ _______ for optical dealie goodness. Part #___-___ will turn out a $2.80 3 foot optical cable. Part #___-___ will churn out a $3.25 6 foot optical cable, and Part #___-___will yield you a 12 foot optical cable. There are of course volume discounts.
And thats all I have to say about that...