PCM does not inherently mean stereo, I don't think. But for DVD player settings it does since it means the Dolby signal is downconverted to PCM stereo for output to compatible devices. Everything is compatible with PCM, TV speakers, headphones, etc. Only a Dolby decoder is compatible with Dolby Digital.

Same goes for DTS, except your player may not have a DTS decoder, so it simply outputs nothing if set to PCM. That's why there is often a separate PCM/Bitstream setting for DTS.

Bitstream (and probably "raw") means it simply passes through whatever is on the disc.

Keep in mind this should only apply to the digital output. The analog output is always analog stereo output. So there is seldom an occasion where you need it set to anything but Bitstream.