"With TV speakers and stereo speakers, the user can choose to enable or disable 'TV Virtual Surround,' so the audio pipeline needs to be able to produce audio that does not have the 3D aspects that I was talking about," Mark Cerny explains. "Virtual surround sound works in a sweet spot, and the user might not be seated in that sweet spot, or the user might be playing couch co-op (hard to fit both players in the sweet spot), etc. When virtual surround sound is enabled, HRTF based algorithms are used. When it is disabled, a simple downmix is performed - eg the location of a 3D sound object determines to what degree its sound comes from the left speaker and to what degree it comes from the right speaker."
...