Upside: Nowadays entry-level receivers have just about everything anybody needs for a home theater. 
Downside: Lightweight build quality; inflated power ratings; basic video-processing.

Entry-level receivers can usually do pretty much everything. Almost all support Dolby-EX/DTS-ES surround processing and uncompressed 5.1 digital audio signals (linear PCM), while a handful does studio-grade Dolby TrueHD and DTS-HD. Thought they are capable of reproducing eight-channel surround sound, you maybe better off with a standard 5.1-speaker package for tight quarters. The extra rear-surround channels are more relevant for larger rooms to cover blind spots, as well as supporting newer 6.1 and 7.1-encoded movies.

Power ratings run from 50 to 75W per channel. In this price range, many of the ratings are inflated, so the specs aren't a good way to judge real-world performance.

Connectivity options are usually adequate for most systems and they include multiple digital audio, component-video inputs and even HDMI switching/repeating. Most, if not all, models also have discreet 5.1-channel inputs for DVD-Audio/SACD. Many of the recent models have also caught up with the Apple iPod fever, shipped with inbuilt or optional docking provision to enable direct multimedia playback.

Expect automated surround sound calibration as standard for all 2008 models, too, while only a handful of low-to-midrange offerings will offer 1080p-upscaling via HDMI. The former analyzes your speakers and room acoustics, then automatically adjust for optimum sound quality at the listening position.

Upside: Features galore; plentiful connectivity options; midline receivers are more solidly constructed than entry-level models. 
Downside: More expensive; systems can be fairly huge and hog too much shelf space.

Besides decoding just about every Dolby and DTS standard and hi-resolution surround sound under the sun, some THX Select 2-certified midrange receivers also offer added audio enhancements. Some of these functions include THX re-equalization, timbre matching and adaptive decorrelation. All these are designed to accurately recreate large theater-oriented movie soundtracks in smaller home environments.

Also, thanks to their superior digital-processing capabilities, midpriced receivers offer better synthesized surround modes a.k.a. DSPs such as Jazz Club, Rock Club, Cathedral, and so on that can be used to "open up" the sound of stereo recordings.

At this category, advanced video-processings such as full 1080p-upconversion, sharpening and noise reduction are almost given. Likewise for other value-added propositions such as programmable remotes for manipulating TVs and other A/V components. Some expensive models even bundle touchscreen universal controller to provide an even higher level of user customization.

A full suite of front-panel analog and digital audio input jack will be available on top of everything we have mentioned for the entry-levels. You will also have the best of both worlds with a generous spread of HDMIs, plus version 1.3 Deep Color (think richer hues) and Lip Sync (audio-video synchronisation) compatibility.

Upside: At this price range, expect honest power ratings, up-to-the-second features, and great sound quality. 
Downside: An overabundance of features can mean overly complex setup chores.

In a perfect world, power ratings would give some indication of the loudness potential of A/V receiver. But unfortunately, not every 100W per channel receiver is created equal. What's inside does make a difference, and beefy power transformers and audiophile-grade capacitors are not only heavy but also expensive; that's part of what you're paying for here.

Higher-end receivers usually offer true multiroom capability. The most advanced multiroom receivers let you control not only the volume but also the source in another room. You might even listen to a different source, say, a CD in one room and the radio in the other room.

The flagship models usually wear souped-up THX-Ultra 2 badge and are engineered ground up with sufficient reserve power to serve up large entertainment rooms. To further differentiate this certification from its THX Select2-equivalent, additional advanced audio processing and three new surround modes are included. The latter comprises THX Ultra 2 Cinema, THX music and THX game.

To match the above audio functionalities, many vendors have outfitted equally competent video components into their premium offerings. An example of such popular implementation is the videophile-grade Silicon Optix HQV processor renowned for its smooth artifact-free HD scaling. Rounding up the value-added bits are wireless multimedia streaming, onboard USB playback, Internet radio, and etc.