Does an HDMI cable transmit audio?

Question

If so, is it digital?

And also, is there a big difference in video quality, if any, between using component HD cables, or HDMI.

I currently have an optical audio cable connected to my xbox 360 to my surround speakers, and I was wondering if i should get an hdmi cable to plug into my tv. If it does transmit audio, and it is digital, then I could plug the optical cable into my tv without reducing sound quality, and also be able to get sound from anything I plug into the tv, to my speakers.

Answer 1

Yes it does transmit audio and it depends they can do both optical or digital (at least thats what i've heard but I am not a audio expert, I know a lot more about video stuff)

and no there is not a TV currently out where there is a difference between hdmi and component for video.

Answer 2

Yes, HDMI is digital

Yes, HDMI can transmit audio

Warning. Many TVs can't accept DD over HDMI (only PCM).

Your current setting is fine - I would not change anything.