In what way do watts matter in a home theatre system? and how many watts are good enough ?

Good question. The short answer is that you need a receiver from a good company that can output about 80 watts per-channel measured honestly. But there are different ways to measure power which is why some $199 systems can claim "POWERFUL 1,000 WATTS". Stick with name-brand receivers like Yamaha, Dennon, Onkyo. I am also assuming you are: * Creating a Home Theater system (5.1) * You are using a self-powered subwoofer (one with it's own AC power cord) * You are using 5 monitor-style or 'bookshelf' speakers. Tower speakers with built-in woofers suck more power so a self-powered sub reduces the watts you need from the receiver. Music systems - try to create concert-hall volume... in the next room. A Home Theater system surrounds a few chairs with a circle of speakers so you dont need or want huge volume and you dont care how loud things are anywhere else besides the center of the circle. What is more important than watts - having a big, black AV Receiver with lots of spare inputs. Too many people buy the skinny box's then discover they cannot hear their TV through the speakers, cannot hook up a game system, watch Netflix movies, watch BluRay movies through the speakers, etc. Buy a system with a full-sized AV Receiver. Good luck (and dont let the salesman treat you like an ignorant girl and get you to over-buy).

In this context, the "claimed" watts are the measurement of how much power the receiver/amplifier can deliver to the speaker. I emphasize the claimed part as different companies use different measuring parameters to determine this number. Just like everything else in life, the quality of one company's watt can vary greatly from another. In previous systems I've owned Harmon Kardon A/V recievers which on paper has fairly low wattage specs compared to it's competition, but outperformed much of the others that claimed higher power. Unfortunately there isn't an easy way to determine how realistic "amplifier x's" claimed wattage is. Brand reputation is as good an indicator as any, but that doesn't address newer companies products that haven't been out long. If considering a purchase, I recommend looking to some of the various home theater enthusiast forums around. avsforum is probably one of the largest, and generally has decent info. Also, Chase Home Theater's forums are great community (personally, much preferred over avs) As the other responder mentioned efficiency directly relates to your question of how much is enough. However, somewhat unlike wattage, the efficiency ratings can generally be taken at face value (until you get into more esoteric speakers, e.g. planars, ribbons, etc which have other efficiency concerns) and at the very least can give you a rough idea if it's something you should power with a more robust amp, or if a smaller amp is sufficient. Having a more efficient speaker will have a much greater impact on your experience than a huge amp. In fact, some newer companies are really starting to push ultra high efficient speakers for home theater with amazing results. If your considering a speaker purchase for your HT, I highly recommend looking at speakers that have high efficiency ratings. Since they require less power, the amplifier can stay more within it's comfortable limits and not distort.

There are no hard rules on how many watts your home theater should have. This also depends on what type of speakers you use and how loud you listen to the system. Most receivers in the market today range from 60 Watts to a maximum of 150 watts per channel. Those who demand more power will go to components, separate power amplifier to drive the speakers. Those home theater in a box are not flexible for adding or upgrading, and when one item fails you have to replace the whole system. What I would recommend is an Onkyo HT-S344, it is a 5.1 receiver and a set of speakers. It is flexible for adding anything to it and for upgrade. Demo the system at any Fry's Electronic, price is under $400. Add a blu ray disc player from Panasonic model BD-65 or 75 for under $100 and you have a nice system. Go online to Home Theater Magazine and read the reviews on all products. Hope this will help you out.