This is a huge topic. Speaker types and configurations and manufacturers are extremely varied and numerous. You have a tremendous range of prices, anywhere from under $100 (my first speakers set me back $80, for example) to over $10,000 (the B&W Nautilus 801 retails for $11,000) and beyond (MartinLogan's Statement E2 can be yours for about $70,000). The methods used to produce sound vary almost as much, from paper speaker cones like the ones in your TV to fabric cones and polymer cones and metal cones to such exotics as the electrostatic speakers (see MartinLogan and Magnepan for some examples). Two-way speakers, three-way speakers, two-and-a-half-way speakers, bipolar speakers, dipolar speakers, and such topics as bi-wiring and bi-amping will all be touched on below. I'll also touch briefly on subwoofers -- both passive and powered.
Standard speakers use cones made of paper or some other material (many use different fabric, rubber, polymer, or metal cone construction) combined with a magnet to move air and produce sound. Metal cones will generally only be found on tweeters (high frequency), which are small speakers, typically no more than 1" or so in diameter. The magnets move the cones, and the cones push air to create the sound. The construction of the cone, the basket that holds the cone, and the magnet are one important piece of the speaker puzzle. Another factor is the enclosure -- if the cabinet is flimsy, it may also move and create vibrations or taint the speaker's output. The cabinet should be rigid and inert enough to not get in the way of the speaker's work. Some cabinets will be completely sealed, which means that as the speakers move, the interior volume changes slightly and the pressure within the cabinet changes. Other cabinets are "ported," which means that there is a path for air to enter and exit the cabinet. The port or ports should be designed to allow airflow to pass without interfering with the speaker's output (a tiny port that will whistle when the woofer moves, for example, would not be a good design). Many speakers are two-way or three-way; this refers to the number of speakers in the cabinet and how the input signal is divided among them. A two-way speaker will have at least two speakers in the cabinet, along with crossover circuits to divide the incoming signal so that one speaker handles the higher frequency sound while the other speaker handles the lower frequency. A three-way speaker is similar, but divides the input into low frequency (woofer), mid-band frequency (mid-range), and high frequency (tweeter). These allow the designer to design the speakers and enclosure to provide maximum performance in each region. A variation on this is 2 1/2-way. In a 2 1/2-way speaker design, there are three speakers: a tweeter that handles high frequency, a mid-range woofer that handles everything from mid-band down to low frequency, and a woofer that assists the mid-range woofer at low frequency. The 2 1/2-way design does not offer the flexibility of a true 3-way, but it reduces the complexity of the crossover system. In any speaker design, the crossover circuit is a critical component -- a poorly designed crossover will ruin the sound.
Bipolar and dipolar speakers use speakers as described above, but the cabinets include identical arrays of speakers on the front and back faces of the enclosure. This can be used to provide very spacious and encompassing sound, as sound is directed toward the listener at the same time it is reflected off the walls behind the source. In dipolar arrangements, the speakers are wired out of phase (as one cone travels forward, the other is traveling back). This produces a sound source that is not easily pinpointed, but tends to heavily cancel out the bass from the speakers because of interaction between the sound waves from the two woofers. Bipolar speakers are wired in phase (both cones travel forward or back at the same time), eliminating the bass cancellation but reducing the onmidirectional sound somewhat. Dipolar speakers are often used for surround channel speakers because they are well suited to mimicking the banks of surround speakers used in a theater. They are better suited to this than conventional speakers because they produce a sound that is difficult to pinpoint the source of (compared to conventional speakers), which provides an effect similar to that achieved in a theater by the numerous surround speakers lining the walls. There are some bipolar main speakers around (see Definitive Technology's BP towers and their BP-2000 series "power towers" which include powered subwoofers) that many people like because of the ability to produce a wide soundstage. Be warned, though, that some people don't like the sound produced by bipolar main speakers it is very much a matter of personal preference, so if you are considering bipolar speakers it would be good to go out and do some listening.
In a home theater environment, at least some of the speakers will end up close to the display. Indeed, the center channel must be as close as possible to do its job properly. When the display uses a cathode ray tube (CRT), the magnets in the speaker can interfere with the CRT and distort the picture. In some cases, it can damage the display permanently. For this reason, speakers near the display are generally magnetically shielded to prevent interference. Any center channel speaker you purchase should be shielded, and the main speakers should either be shielded or should be kept at least a foot or two away from the display.
Because speakers are such a pivotal part of a home theater or home audio system, the method in which they are connected to the receiver or amplifier can be very important in maximizing the speakers' performance. Many higher-end speakers can be bi-wired or bi-amped. Such speakers are provided with two sets of binding posts rather than the traditional one set. These two sets will be connected with jumpers by default, but can be separated. When they are separated, the low-frequency crossover is isolated from the mid-range/high frequency crossover. In a bi-wired scenario, two speaker cables are connected to the same binding posts on the receiver or amplifier and run to the speaker. One cable is connected to the low-frequency binding posts, and the other is connected to the mid/high binding posts. This method of connection can provide some improved audio quality by separating the signals specifically signal "noise" that may be generated by the speaker magnets and pushed back down the speaker cables. By isolating the low frequency and high frequency, signal noise reflected from the woofer can't muddle the high frequency signal being delivered to the tweeter. Bi-amping is similar, but relies on separate amplifiers for the two speaker inputs (in other words, instead of using a two-channel amplifier to drive two speakers, you would have two two-channel amplifiers, with each amplifier either handling a single speaker or a frequency range). Bi-amping is obviously expensive, but bi-wiring can be an economical method of improving sound quality for speakers that allow for it.
The one component of a home theater speaker system that we haven't touched on is the subwoofer. Subwoofers are used mainly for home theater, although they can be used for two-channel audio as well. They are designed to reproduce only the low-frequency sound, often between 20Hz and 80Hz to 150Hz. Some subwoofers are "passive" that is, they are simply a speaker, usually with crossover circuits to isolate the low frequency and reproduce it; a few passive subwoofers will also include outputs to the main speakers as part of the crossover circuitry, providing a mid-range and high frequency speaker output for the mains to use while it handles the very low frequency. Powered subwoofers can be used similarly, but incorporate a built-in amplifier for the subwoofer speaker(s). Powered subwoofers can usually accept a "speaker" input from the receiver or amplifier, but they generally also have the ability to be connected to an unamplified "LFE" (low frequency effects) output from the receiver or pre-amplifier, which is the recommended approach for most home theater systems. This is the ".1" portion of 5.1 and other discrete multi-channel surround systems. I have used both an SVS 25-31PCi powered subwoofer (reviewed here) and Outlaw Audio LFM-1 subwoofer (reviewed here) in my system; of the two, I preferred the Outlaw, although SVS does have a large and loyal customer base for their range of products.
All of this just brushes the surface of speaker design and the speaker market. If you go shopping for speakers, you will have a wide range of options available to you. Stores like Best Buy carry a lot of different speakers, but only a few brands. I'd be very wary of what is available at a major chain like Best Buy or Circuit City -- there are some decent speakers available, but there are probably better speakers to be had for the same price if you do some looking at a specialty audio store. For a budget home theater system (or two-channel music system), you will be much happier with a set of speakers from a manufacturer like Paradigm, Energy, or Klipsch than something from Bose (I'll touch on my experiences with Bose below, before we move on to displays). A common solution to the budget home theater speaker problem is to use sub/sat systems -- packages that use small bookshelf or "satellite" speakers paired with a subwoofer designed to cover the low frequency range that satellite speakers can not reproduce. Energy and Boston Acoustics (among others) both make reasonably priced sub/sat sets, and manufacturers like Paradigm have recommended speaker combinations that achieve the same thing. If you are looking to spend a little more on speakers, you may find yourself looking at some higher-end Paradigm or the Paradigm Reference speakers, Definitive Technologies, KEF, M&K, or some entry-level B&W. The best way to find the speakers that are right for you and for your pocket book is to read up on all the alternatives (a site like AudioReview is very good for getting information from other consumers) and to go out and listen to what's available. Pick out a few CD's that you like and are familiar with and go try them out; a good store will let you use your own music, and many will let you demo equipment at home that you are particularly interested in. You may also want to consider some of the new online vendors, who offer an excellent value. Typically these manufacturers offer a 30-day or longer money-back guarantee. Some of these manufacturers include AV123's Rocket speakers, Aperion Audio, Ascend Acoustics, and Axiom Audio. I use a pair of Axiom Audio M3ti's as surrounds along with my Paradigm Reference speakers, and have been very pleased with their performance. They are not equal to the Paradigm Reference line, but they are significantly better than their $300/pair price tag would suggest.
Having said all of that, I want to end this with some personal observations on some of the speakers that I have used. I replaced an $80 pair of no-name speakers in early 1997 with a set of Bose Acoustimass 7 speakers (a bass module and a trio of double-cube satellite speakers) and a pair of Bose Model 100 speakers as surrounds for my Dolby Pro-Logic system. The Model 100's are now discontinued, and have been replaced by the very similar Model 161. They were certainly better than what I'd had before, but time and experience have proven to me that the benefits were not in line with the price tag. The Acoustimass system uses a bass module (basically a passive subwoofer with typically two or three 5 1/4" paper cone drivers in a ported plastic enclosure, along with a 2-way crossover circuit to divide the input signal between the bass module and the satellites) and a number of satellite "cube arrays." The Acoustimass 7 (as well as the AM-5, AM-10, and AM-15) uses cube arrays with two 2 1/2" paper cone speakers in separate plastic enclosures that can be aimed individually. I actually got the best results from aiming both cube halves forward, rather than aiming one toward a side wall as suggested by Bose. The cubes are connected to the bass module, receiving the high frequency output from the module's crossovers. If you start looking seriously at Bose, you will notice several things: 1) they never list performance data for their speakers, 2) they advertise heavily, 3) they never seem to show up in specialty audio shops, and 4) there are a lot of people online who take every opportunity they find to vehemently attack Bose, along with a lot of people who want to tell you that the speakers are actually great, better than anything from companies like Paradigm or Polk or even B&W. So who do you believe? First, ignore everybody and let your ears decide. Listen to all of the alternatives, keeping in mind things like the source material (can you put your demo discs on the Bose?). Heck, borrow a set of comparably-priced Paradigms or Energys from somebody and go buy some Bose from Best Buy (make sure you can return them the next day if you aren't satisfied, otherwise ignore this idea) and compare them head-to-head in your listening space. Then, think about the designs. Basically, with the Bose you have speakers too small to be good for low frequencies in the bass module (5 1/4" is on the small side for woofers and far from the typical subwoofer drivers, which start at 8" and on better subs range from 10" to 15") coupled with speakers in the cubes that are both too small to be good midrange speakers and too large to be good tweeters (2 1/2" is not a typical size, because it's far larger than the 3/4" and 1" tweeters that are best at very high frequencies and smaller than the 4" to 6" speakers that tend to be best at mid-range). You also have poor quality construction -- paper cones, plastic enclosures with little or no bracing, and spring clip connectors. See the site Bose: Better Profit Margins Through Shortcuts for a scathing analysis of the Acoustimass line and also take a look at the unofficial Bose FAQ. The first site looks at the design, construction, and performance of the Acoustimass system, and the findings aren't pretty. As someone who accepted the Bose marketing and used these speakers for more than four years, I can say that there is a great deal of truth to their findings. According to the site above, the bass module is only capable of 46Hz to 202Hz, and the cubes are only able to produce sound between 280hz and 13.3kHz; that leaves low and high extremes totally left out and creates a hole in the low mid-range. Add in the fairly cheap construction, and you get speakers that are disappointing once compared to similarly-priced or cheaper mid-fi speakers. Decent home speaker sets can be had for under $1000, and with much better performance than the Acoustimass line offers. Having said all that, I will add that the Model 100 surrounds are not too bad: they are based around a 4 1/2" composite cone speaker (not the usual Bose paper cone) that have enough range to serve as decent Pro-Logic surrounds (the surround channel in DPL is not full-range, so you don't need a speaker that can provide the high and low ends). If you can find a pair used for $50 or so and are on a budget, give them a try. At the list price ($150) I can not recommend them, as there are better speakers available for no extra money.