Here is basically what it is -
Stereo is where the sound is simply more left or right, sort of like if you placed a ruler in front of you and measured along it. It has only more left or more right. In effect there is only an X axis.
Virtual 3D or surround attempts to use stereo in order to make it seem like sounds are coming from different true directions such as behind you, or anywhere along a circle around you. This is only a trick however and it is only truly using stereo. This is essentially using an X axis and tricking your brain into thinking there is a Y axis as well.
Real hardware 3D is where you use speakers in a surround sound arrangement, and the speakers actually make the sound come from the direction it is intended to be coming from. This is where the sound would have both an X and a Y axis, no trickery.
The reason I have trouble with the term "3D" is purely a technicality, that 3D implies the use of a Z axis which there is not.
cx2
-----
To live by honour and to honour life, these are our greatest strengths and our best hopes.