Netflix currently uses Dolby Digital, which is available, as Scott mentioned, through certain devices which include many of the latest higher end Blu-Ray players, Sony Play Stations and Xbox 360's, as well as wifi ready streaming devices like those offered by Roku. Vudu offers Dolby Digital Plus which runs at a higher bit rate then Dobly Digital, but is not quite up to snuf with their lossless True HD audio format. Vudu also offers the best picture quality which streams up to 20 mps which is about as close to Blu-Ray (up to 35mps) as you can get. It should compete with most cable and satellite 1080p PPV formats.
Ian