How many do you need?  First, decide if you are going to use a 5.1 or 7.1 speaker set-up.  A 5.1 system consists of 5 speakers and 1 subwoofer.  It will have a front left, center, front right, surround left, and surround right speaker (the surround speakers in a 5.1 system are called the "rear" or "back" speakers in normal conversation).  A 7.1 system adds another set of speakers behind you.  Most people can only fit a 5.1 system in their home.  You can see the recommended speaker layout for a 5.1 and 7.1 system below.

Now What?  Once you know the placement and how many speakers you'll need, it's time to decide which type to buy.  There are several types of speakers including: satellite, bookshelf, in-wall, in-ceiling, center channel, tower, and soundbar.  You will also need a subwoofer.  When deciding which type of speaker and subwoofer is right for you, consider these 3 factors: sound quality, room decor, and price.

Satellite Speakers:  These speakers are very small and discreet.  They can be ceiling or wall mounted or placed on a stand.  They can be as small as your fist or as large as two fists.  Even the best satellites can't compare with good bookshelf speakers for sound quality, but they can make up for it by their discreet appearance and low cost.  If you are not a big sound buff (audiophile), but you still want to have the home theater experience at a low price, then satellites should be your choice.  Satellite speakers are the most difficult to install due to the fact that you can only make a small hole to bring the wire out, and all your work is visible once the speaker is installed.  They are usually sold in complete packages with a subwoofer included. The price will range between $300-$1500 depending on the quality you want.  Average consumers will spend between $700-$1000 on package.

This is what a satellite speaker looks like when it is mounted in the corner of a room.

Bookshelf Speakers:  These speakers can be found in various sizes ranging from the size of your toaster to the size of a 5-gallon bucket.   Bookshelf speakers can be wall mounted, placed on a shelf, or placed on a stand.  Good bookshelf speakers can provide excellent sound.  They will rank behind tower speakers as far as sound quality goes.  They are probably the hardest to add to your room decor because they don't really look like they belong no matter where you put them.  If you can find a place for them, you can get great sounding bookshelf speakers at a reasonable price. They start at $100/pair - $2000/each depending on quality.  The average consumer will spend $200-$400 per pair.

These are book shelf speakers mounted on either side of a plasma TV.

In-wall speakers:  In-wall speakers are installed just as the name describes- in the wall.  They can be the size of a toaster to the size of a small microwave (just the front of the microwave).  In-wall speakers will cost more than bookshelf speakers, but comparable bookshelf speakers will sound better.  Usually, they are installed on either side of a flat panel TV with a 3rd installed either above or below the TV.  The side speakers are installed vertically with the 3rd speaker installed horizontally serving as the center channel.  That 3rd speaker can be hard to place, since it should be centered on the TV and there is often a wall stud in the way.  You can always move the stud (following building codes) or move the TV, but that might be more than you want to deal with.  Another option is to install the side speakers in the wall and have a table top center channel on a shelf or cabinet below the TV.  In-wall speakers also work great as rear speakers. 

In-wall speakers sound great, are easy to install (if there isn't a stud in the way), and can go with any decor.  Windows and studs are an in-wall speaker's greatest enemy.  They will make installing them difficult or impossible.  If your wall has room for an in-wall speaker, you want great sound, and you don't want to disrupt the room decor, in-wall speakers should be your choice.   Prices will range from $100 each to $2500 each depending on quality.  The average consumer will spend between $200 and $500 per speaker. 

This is an installation with in-wall speakers installed on either side of the TV.  The center speaker is turned side-ways and installed above the TV.

In-ceiling speakers:  These speakers are just as the name describes them- installed in your ceiling.  They are very easy to add to any room since they blend-in and can be painted to match your decor.  The sound quality of an in-wall is not as good as either an in-wall or bookshelf speaker, but can still sound very nice.  They can be installed in almost any room and are great for background music in kitchens and bedrooms.  If you want a really clean looking installation and can't find a place to use in-wall speakers, in-ceiling speakers are a great option.  In-ceiling speakers range in price from $100/pair to $1500 each.  The average consumer will spend between $150 - $350 each for surround sound speakers and $150/pair to $400/pair for background music speakers.

This is an in-ceiling speaker installed above a shower.  This one is moisture resistant, so it's perfect for this environment.

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