While not everyone can afford a top of the line home theater room, that doesn't mean that you need to settle for a home theater that isn't perfect for your needs. Most families and households are different, but there are some things that almost everyone has to have. Home theater rooms can quickly spiral out of control cost wise if you don't plan ahead.
1. Flat Screen Televisions The latest in HDTV technology is the LCD TVs that are lit with LEDs, making them brighter and less energy voracious. If you're in the market for a new TV, make sure you get the LED LCDs, not the traditionally lit ones. It will make a significant difference in your viewing pleasure. We've never been fans of 3D TV sets, so we'd stay away from these for now, until the technology has proven itself.
2. Home Theater Computer For many people, a home theater room has to include a computer of some sort, mainly to allow you to stream media from it. A WiFi network will allow you to share data from your main desktop or laptop to this computer. You can use PCs or Mac Minis for this task.
3. Speakers There are so many ways to set up the sound in your home theater. However, we usually go for one of two options. We like to use cheap surround speakers or two bigger speakers that are more hi-fi. The second option is the one that will last you the longest. There are many types of speakers available, and they can get expensive quickly. Or you could simply make your own from a kit. Kits will make some very good speakers, if you can do it by yourself. Remember that you'll be spending a few hundred dollars on cables, so take that into consideration when buying speakers. We'd stay away from anything wireless.
4. Headphones If you live with other people, you'll have to use headphones at one time or another. A good pair will replace speakers quite easily, no matter what the situation. The trick is having an extension cord for your headphones. We like the ones from Sennheiser, but here are a few other options.
5. Amplifier Whatever your setup, you will need an amplifier of some sort. Once again there are many options, but we like the ones from NAD. Here are some other available options that won't break the bank.
(Image: Flickr member Daniel Greene licensed for use under Creative Commons, other image credits can be found by clicking through)

White Enamel Flatwa...
This is some poor advice here. Why would you "like to use" cheap surround speakers as an element of your Perfect Home Theater? Speakers are the most important part!
Instead of getting tricked into spending a few hundred dollars on cables (remember...you are a fool for spending that much) spend the cash on the speakers - and then by the same quality cables from somewhere like monoprice.com.
i second the monoprice choice, always load up on cables
Here's a quick third for monoprice.com. They are awesome!
Also, as I've said before many times as you guys continue to poop on 3D TVs, the TVs with the highest quality picture are going to be 3D anyway because 3D costs pretty much nothing to add. If you want me to go into the details as to why this is (again) I'm happy to just let me know in a comment and I'll respond.
Anyone shopping for a nice new TV should just try to get the nicest TV you can afford. If you care about 3D, then make sure your TV has it. If you don't, then it's no big deal if does.
Finally, I'm going to give a huge shout out to Samsung's D8000 series. They have an ultra-thin bezel at 5mm and are only 1.2 inches thick. They also have superb picture quality, which is the most important part.
Eh, too much incomplete or bad advice.
1) LEDs are better, but placement and proper size are more important. You can have a great LED TV, but if it is undersized/oversized and has bad placement you are going to have a crappy home theater.
2) Yup you need this. You also need to make sure you have a 802.11N network that is fast, or else the HD video is going to stutter and chug.
3) The poster who wrote this about the speakers must not know much about speakers. These are key. If you want to go ultra HIFI, invest in a really good 2 channel system with 2 excellent speakers. When you have more money, you can sell the 2 channel amp, and upgrade to a 5.1 amp and extra speakers.
For a kit, I have the Logitech Z5500
http://www.amazon.com/Logitech-THX-Certified-Digital-Surround-Speaker/dp/B0002WPSBC/ref=sr_1_1?ie=UTF8&qid=1300359750&sr=8-1
This sounds better than many 700 dollar 'Home Theater' 5.1 kits.
Speaker placement is also key, you can have excellent speakers, but if they are placed wrong the 'room sound' will not be that great.
4) My upstairs neighbors were almost deaf before I moved in.....
5) Yup, amp is important.
Hear hear for monoprice!
I don't know how many times I have to say this to the Unpluggd writers but a flatscreen TV and fancy leather couches does not a theatre make. A home theatre is a dedicated room with a PROJECTOR. This is a family room. Or "TV room" even. But this is NOT a theatre.
This isn't a matter of just being pedantic, it's a matter of knowing what your alleged area of expertise is (home tech) and being able to use the appropriate terminology and understanding the technology. Frankly, it's getting a little embarrassing.
I dunno I had a projector once and aside from the fact that I did not need a TV in the room it wasn't a huge deal. Then again, the wall had to be white or I would have had to install a screen. If the point of the room is to have a movie watching space tho' I have no problem with a TV out in the middle of it.
i don't know. saying it must have a projector to be considered a "home theater" seems a bit nit-picky to me.
Honestly, LED backlighting offers a negligible improvement on picture quality. Unless there's real local dimming, the backlight is largely irrelevant. LED is generally superior for environmental reasons.
I agree with the projector comments. i'm not sure its the most vital component. It seems the current usage of the term actually concerns the audio more, i.e. going beyond the built in speakers on your TV, and more than just a stereo setup.
A full blown computer is not a must and as setting it up might be a bit painful, I'd actually suggest a media player of some sort. There are plenty of those these days: ASUS O!Play, WD TV HD, etc. I used to have a regular computer for playing media on my TV, but got rid of it and bought ASUS O!Play instead. I've had it for over a year now and I'm not missing a bulky computer sitting next to my TV stand and making humming noises.
And why would you suggest a stereo amplifier for home theater? It's not a theater without some decent DTS decoding.
One more thing. While current amplifiers have processing logic that can setup the sound no matter where the person is seated, I'd still consider making everthing as symmetrical as possible. I'm a big symmetry fan ;)
Unplugged does a lot of things well, but home theater advice is not one of them.
You often get a bigger bang for your buck with a projector than with a flat-screen TV; a sub is probably a better addition than headphones; cheap speakers are never a good option (you'll regret it in the long run); and mis-matched speakers are also not a good idea. You should also run as fast as possible from anyone who advises you to spend hundreds of dollars on cables!
If you are planning a real HT, a media room, or just a living room with a TV and speakers, and want to get the most for your money, go to a real audio/video site such as avsforum.com and get accurate advice tailored to your specific goals and needs.
I am glad I am not the only one who found this article to be a total waste of time.
Elements for a "TV Room":
1) Enough electrical power for your devices. Be careful here - one outlet can only handle so many volts.
2) TV sized right for the room (a projector or any TV larger than about 37" would look ridiculous in our 9' x 9' TV Room). A projector, a TV, whatever you want.
3) Some way to stream media from the Internet. Whether through Apple TV, XBox Live or another console, and/or an S-Video cable running from your laptop to your TV setup (we have the XBox and the laptop set ups - I haven't had an issue with humming...), just use what works for you.
4) Decent set of speakers. They are in a set for a reason. This will also make managing energy (will using X speaker with Y speaker trip the breaker?) and surround sound much easier (if you need it. Again, my TV room is a 9x9, we use the speakers on the TV).
5) If you can turn the volume down, you shouldn't need headphones. Otherwise, there are ways to turn off sound from a speaker system and just run through the TV to further lower volume.
6) Not a music amplifier. If you get a decent set of speakers, the amps, subs, etc. will come with it and you know it will be compatible.
7) Storage. You have to put all this stuff somewhere! Whether you have speakers custom installed (like my parents did), or you just need a convenient place to put your XBox, you need to make sure you have a way to store all the components to your TV Room.
There - I'm pretty sure I was just a vague, but in some way more helpful than this guy. Wiring and setting up spaces for TVs is one of my only technological specialties.
Electric Katie #6= Failure good speakers hook up to ams and don't come in all in one solutions. Get an inexpensive big Black Stereo receiver two speakers, two subwoofers and a Blu ray player for the same amount of money an dit will be better,
Also overlooked is "Lighting" - lighting is one of the key elements for a home theater room!!
There are lots of fun things you can do with your theater to make it more enjoyable (read "functional yet fun to be in").
one of the local lighting stores where I live (Hansen Lighting in Draper, utah in case you're nearby) just sent around an email talking about this since football season is starting up, I found it very helpful.
Adding in something talking about lighting would be nice - I think it's often overlooked and people simply throw in some can lights with a cheap dimmer and call it done. :/