On Googling for this, you will be instantly presented with a very informative set of links. However, the problem is that the forums posts and blog posts are dated. This is a fast changing field, and with every product release, the crown shifts from one company to the other. With this in mind, I intend to keep this series of posts updated as and when there are relevant market changes. I will provide the most interesting set of links from the Google results at the end of this post.

The next post will weigh the pros and cons associated with various graphics card options for a HTPC build.

Interesting Googled links for choosing a good HTPC card:

1. EngadgetHD Invited User Comments

2. AnandTech's Review of ATI 4350 and 4550

3. Max Builds a HTPC

4. AVS Forum Thread on ATI 3450

5. AVS Forum Thread on ATI HD 4600 and 4800 series

I will try to summarize the gist and conclusions from the forum threads in future posts so that you can save time by directly finding out the present state of affairs with respect to that topic.

This post covers the characteristics of the HDMI connection in a perfect HTPC.

Video support: The HDMI connection must be able to transfer video at 1080p (FullHD - 1920 x 1080). Even HDMI 1.0 is able to do this, so we are perfectly fine video wise.

Audio support: This is where problems start to creep in, depending on how your PC manages to get a HDMI output.

Nvidia graphics cards with HDMI output act as a dumb SPDIF passthrough (This is not to be confused with the AV receiver's passthrough). They require a wire connection from the motherboard's SPDIF pins onto the graphics card in order to be able to get the audio signals out through HDMI. Thus, all restrictions which exist for SPDIF audio also exist for this type of HDMI audio. Most SPDIF mobo connections are able to support only 1.5 Mbps bitrate (though some are supposed to be upto 6.144 Mbps), and thus, the HDMI audio out of such cards can also support a maximum of 6.144 Mbps only.

ATI graphics cards with HDMI output have an audio processing chip on board. They are able to grab sound through the PCI-E bus and need no mobo SPDIF connectors. This is pretty advantageous since installing the graphics card is a simple matter of plugging it into the PCI-E slot. (Depending on your mobo capabilities, you might need to connect to the AGP slot -- if you have a really old computer!). Whether the audio over HDMI from ATI graphics card is subject to the same issues and restrictions as the SPDIF outputs is not yet confirmed (One of the popular DirectShow audio filters, AC3Filter, is able to control ATI HDMI audio as a SPDIF output)

Present day Blu-Ray media have lossless HD audio codecs for their audio tracks. These include DTS-HD Master Audio and Dolby TrueHD. These audio tracks potentially need upto 36.864 Mbps of bandwidth for their 8 audio channels. SPDIF simply doesn't have enough bandwidth to support this. As far as I know, there are no ATI cards which support this much bandwidth also. If you want to get the sound out from the HDMI for these tracks, there is no option but to decode it inside the PC (VLC 1.0.0 claims it is able to decode DTS-HD and Dolby TrueHD in software) and convert to LPCM before sending it out through HDMI. Bandwidth requirements further restrict the sampling bitrate and frequency for this LPCM stream also, and it is not possible to maintain the same fidelity as the original sound track.

The funny thing is that all HDMI specs allocate 36.864 Mbps of bandwidth for audio (right from HDMI 1.0). Thus, it appears like the HDMI outputs from the graphics card manufacturers do not conform to any HDMI specification!!

As of now, audio over any PC HDMI port (be it the latest graphics cards or any IGP (integrated graphics on the mobo)) is subject to same restrictions as SPDIF. The only advantage over SPDIF is the fact that the number of cables coming out of the PC is minimized.

We need HDMI 1.3 at present to enable lossless HD audio codec bitstreaming. Standalone systems like Popcorn Hour and Xtreamer already claim HDMI 1.3 output support along with lossless HD audio codec bitstreaming. Mobo / Graphics Card manufacturers are fast running out of excuses. Manufacturers of mobos / graphics cards must clearly mention (with no small print anywhere) the version of HDMI supported, as well as the maximum available bandwidth for audio on their system. It is also essential that some APIs / support be provided to the DirectShow developers / open source developers so that the active multimedia community can make the best use of the platform to further the experience of the HTPC enthusiasts. The perfect HTPC will remain a Utopian dream until such a graphics card comes to the market.

The primary component of a HTPC set up is the PC itself. The primary objective is to get audio and video out of the PC onto your display and speakers. There are a multitude of ways to do this. The Wikipedia article on HTPCs gives you an array of options to get the video out, but no mention is made of the way to get the sound out (at least, the version on Wikipedia as of 20th Aug, 2009).

Video:
There is no point in going forward with legacy connections like Component, Composite, S-Video etc. which do not support Full HD (1920x1080 resolution). So, if you see any graphics card for your HTPC which support those connections, remember that your hard-earned cash is going to go towards supporting people with legacy equipment. If you are not one of them, you are better off getting a card without those connectors. In my opinion, VGA is as far back on the legacy scale that I would go while checking supported outputs, while shopping for a graphics card. Hence, we are left with three options, namely,

1. DVI: The DVI standard was brought about mainly to serve computer monitors with much higher desktop resolutions than what VGA supports. As such, it is not meant for TVs (which are the usual video display units for HTPCs). TVs rarely advertise the availability of DVI inputs. The main advantage of DVI connections is the fact that the resolutions output on them can far exceed 1920x1080 (can go up as high as 2560x1600). One of the variants of DVI can also carry audio but using DVI in a HTPC is fraught with issues. My suggestion would be to avoid using DVI connections completely for this purpose.
2. HDMI: HDMI is the de-facto standard for AV communication between most consumer devices (camcorders / Blu-Ray players etc. and TVs). Unfortunately, it is not royalty-free, but it got accepted into the market much earlier than the competing open standard (DisplayPort). Millions of devices have shipped with HDMI in them, and it is not possible to turn back the clock. As of now, there is no better alternative to using HDMI for our AV needs in a HTPC. HDMI 1.2 could only support upto 1920x1200, but HDMI 1.4 (the specs of which were released in May 2009), can support upto 4096x2160. It is good to see that HDMI is keeping up with the times. However, as of now, we do not need to worry much since there are no commercially available and affordable TVs which go above the 1920x1080 resolution.
3. DisplayPort: The most interesting option is the DisplayPort. It is royalty free, which means lower cost for the consumer, but it got into the game later compared to HDMI. Hence, its adoption rate is low. It also supports audio. At present some high end Dell monitors support DisplayPort, but no TVs as of August 2009 support it. Hence, for HTPC purposes, it is best to stay away from DisplayPort.
   

Weighing the pros and cons, we can safely reach the conclusion that HDMI is the way to go in order to get video out of your HTPC.

Audio:
Most motherboards have inbuilt audio nowadays. Depending on the output availability, the following methods can get the audio out of your PC:

1. Analog Out (2 - 8 channels): These are the PC outputs which can be directly connected to computer speakers. The digital sound (in terms of 0s and 1s) inside your PC undergoes digital-to-analog conversion with chips inside the motherboard / sound card. The quality of the DAC chips decide the cost of the card / mobo. HTPC enthusiasts usually don't trust these DACs, and that is the sole reason why it is preferred to get the audio out from the PC as a stream of bits (digital audio). It must be kept in mind that costly soundcards have high quality DACs inside them, and the analog audio out for these are usually fine by HTPC standards. However, there is a very valid reason to avoid these add-on cards (dependent on other components of your HTPC)
2. SPDIF Out: This is a way to get the digital audio out of your PC. This means that the conversion to actual sound takes place in some other component of your HTPC outside the PC. Almost all AV receivers have a SPDIF input and the PC output can be connected to this. The speaker wires then run from the AV receiver and then onto the actual speakers. The DACs to convert digital audio to analog are inside the AV receiver. There are two types of SPDIF connectors (as mentioned in the Wikipedia article), namely, Coaxial and Optical. Since AV receivers can process multi-channel sound, SPDIF can be used to transmit 5.1 channel digital audio also. SPDIF is preferable to analog out, since the HTPC enthusiast has more control over the quality of the DACs which provide him with the sound.
3. HDMI: Well, we encounter HDMI again! HDMI provides for digital audio transfer similar to SPDIF, with the advantage that it is part of the same cable that carries the video! This minimises cable clutter at the output of the PC. However, there is a downside with respect to the fact that the HDMI receiver be able to understand the audio signals coming through. The HDMI cable from the PC's output can be directly connected to your display's HDMI input. If you are connecting the HDMI cable from the PC directly to the display, you will have to make sure that the sound output through the HDMI is stereo LPCM (or, in layman's terms, completely decoded digital sound with only 2 channels). Multi channel output connected to TVs do not really make your HTPC experience any better. A home theater evokes images of surround sounds where you get immersed in 5.1 or 7.1 channel surround sound with speakers all around you. To get this, the HDMI cable has to be routed through a AV receiver. Many AV receivers boast of HDMI inputs and outputs. Do not get misled by this marketing hogwash. Read the fine print of the AV receiver's specifications, and make sure that it is capable of decoding / processing sound on the HDMI input. In most receivers, the feature to decode sound signals on the HDMI input is termed as the 'repeater function' in contrast to the 'pass-through function' where the signals appearing on the HDMI input are transferred unmolested to the HDMI output. If the AV receiver is a repeater, the HDMI output from it is video only. This video is then displayed on your TV and there is no need for the display to process sound. The sound is routed by the AV receiver from the HDMI input and onto the speakers after the necessary processing (decoding / digital to analog conversion).
   

The perfect HTPC set up would utilize HDMI for transferring both audio and video out of the PC.