I a little confused about AC-3 Decoding. Do you need it on a DVD player? Doesn't your reciever do this for you?

Do you need decoding on both DVD & Recievers?

I posted a thread about best DVD player under $300. Now I'm unsure of what to purchase.

I like Sony equipment and really would like all my components to match. I am on a limited buget and want to build a home theater system for as little as I can (not to sacrifice quality though).

What setups would you recommend that will give me AC-3 capability in the following:

Reciever?
DVD Player?
VCR?