Tonight I was playing Ghosts and decided to mess around with the audio settings. I previously had the PS4 to Bitstream(Dolby). I changed it to LPCM and right away I noticed a difference with the way my gun sounded, but I didnt really put much thought into it at that time. The PS4 is nice in that you can swap audio settings without quitting the game, so I could quickly swap settings. After a few minutes of play I quickly noticed that positional accuracy of sounds was GREATLY improved over Bitstream(Dolby), pretty much down to pinpoint accuracy. With BS(D), I heard the sounds in the general area, but I found myself searching for the sound rather than hearing it and going right to it (if that makes any sense). If my words cant explain it good enough, let me just say it was a night/day difference.
There was 1 downside to LPCM compared to BS(D). Explosions and other stuff going on in the map seemed much louder, which sometimes interfered. BS(D) seemed much softer sounding overall, and distant explosions actually sounded like they were distant.
I dont really know why there is such a difference between the 3 formats. I did try the DTS option for a few games and from what I can tell it sounds just like the Dolby option.