RCA connectors can be used for both composite (1 connector) video and component (3 connector) video. The quality order is:
BASIC - Composite (1 RCA wire, Yellow)
BETTER - S-Video (1 wire, usually black)
BEST - Component (3 RCA wires, Red, Green Blue)
Composite can only send standard definition video, up to 480i.
S-Video can only send standard definition video, up to 480i.
Component can send video up to 1080i High Definition.
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Video is picture and audio is the sound. Home theater receivers have RCA composite or component, S-Video or HDMI for the video input, and RCA analog, Toslink (optical) or coaxial inputs for digital audio.
Component (red-green-blue) 3 wire RCA will always have a superior picture.
Both the source and the TV have to have a HDMI connector. If they don't, use the S-connector. No S- connector? you will have to use the VIDEO connection on the TV.
The PS3 is capable of outputting video from its HDMI port, while at the same time outputting audio from the PlayStation AV port. You would connect anyPS2/3 AV cable that had stereo RCA outputs (the pair of red and white plugs), but you would not connect the video plug(s) of that cable (S-video, RGB plugs, or a yellow plug). You would leave the video connectors unplugged because you are using HDMI for video. But a better option would be to connect a cable from the PS3's optical audio port for surround sound. If your surround receiver has a digital optical audio input, use that. It will allow you to hear 5.1 channels of surround audio. The red and white RCA plugs can only support 2.0 channels of audio (stereo).
There are three differences: S-video is an analog connection while HDMI is digital and carries audio as well as video signals. HDMI cables can carry a wide range of SD and HD signals while S-video is a signal type restricted to standard definition only. HDMI carries a component signal, a better quality signal than the color encoded signal carried on S-video. So, given the choice, HDMI will normally provide a better image, even if it is carrying SD and is the only choice for HD content.