Confused about 7.1 Formats

I am a bit confused about all these formats (kind of new to all this). I have been looking at the Anthem AVM20 and the new Krell Showcase coming out soon. The thing is that they are all 7.1 pre/pros -- does this mean I need a seven speaker setup? What would happen if I wanted to watch a DVD such as Gladiator and I have a 5.1 setup for speakers? Will it work properly or will I be missing something. Isn't the DVD encoded with 5.1 so it will only play 5.1, if so is the only reason they call it 7.1 is for when movies start coming out on THX Ultra 2 and the like?

Thanks for all the clarification, just nervous as I am working on a tight budget -- two speakers extra means more $$$.

JPLENHART