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Some TVs can only pass audio when it's in a certain format (DTS or Dolby), while others can pass both audio formats. Most TVs support some sort of audio passthrough over ARC and Digital Optical connections, while more TVs are starting to come out with eARC support for lossless Dolby Atmos and DTS:X signals. It's important to have a TV that supports passthrough if you watch movies with these audio formats, like Blu-rays that tend to have DTS:X audio.

Passthrough is only helpful when you have the following:

If you use the TV’s speakers, you don’t need to worry about passthrough because sound is played from the TV directly. Passthrough isn’t a necessity, and it's only important if you have a surround sound setup or a dedicated soundbar. You can still get the same audio-video experience without passthrough, but you'll have more wires going to and from your TV. This image is an example of a 5.1 surround sound setup with a TV that doesn’t support passthrough. You can see that two cables are going to the TV - one for the video and one for the audio. A 5.1 setup is one of the different configurations you can have, and it's used more with Dolby Digital and DTS signals, while newer formats like Dolby Atmos and DTS:X use more speakers, like 7.1, 5.1.4, etc.

In short, passthrough is just an option that allows you to get surround sound for multiple source devices with fewer cables. It also means you can connect sources directly to the TV for the best video experience, while the TV passes on the audio duties to the receiver. Here are a couple of examples of home entertainment setups that take advantage of a TV's audio passthrough. You can either connect the sources directly to the TV if you have a soundbar with one HDMI input, or if you have a receiver with multiple HDMI slots, you can connect all your sources to that instead. However, this is only beneficial if none of the sources are new gaming consoles because you can't take advantage of the console's features if you connect it to a soundbar or receiver. Since ARC over HDMI sends and receives audio and video signals, you only need one wire between the receiver and TV.

While you can connect your sources to your receiver and pass audio to the TV, connecting those sources directly to the TV has its benefits, especially if you're a gamer. With more and more TVs supporting HDMI 2.1 bandwidth and variable refresh rate (VRR) support, you can take advantage of those features with your gaming console connected to the TV and the TV sending high-quality audio to the receiver. If you connect an HDMI 2.1 gaming console to an HDMI 2.0 receiver, you're losing the advantage of HDMI 2.1 bandwidth.