When British company One Limited first demonstrated its innovative digital surround projector technology to us, we knew it was onto something rather special.

Previewed in 2003, it employed an array of 254 transducers, individually driven by some complex digital electronics, to impart 'steerable' beams of sound that effectively do the same job as the multiple speakers of a conventional 5.1 system. These sonic beams are either aimed directly toward the listener, or 'bounced' off the walls. The kit was licensed in its original form by Pioneer, but priced at an impractical £25k. Hardly a mass-market proposition, then...

Enter Yamaha, which had also acquired a licence from One Limited. Yamaha's approach was much more populist. Resembling a long centre-channel speaker, the firm's original YSP-1 had only forty of the 'steerable' transducers (plus two conventional driver units, to cover the lower frequencies that don't impart quite as much directional information). As owners of its AV amplifiers and receivers know, Yamaha has a lot of experience in the field of digital signal processing - and that must have come in very useful when designing the YSP-1's electronics.

I was among the first to hear a production version of the YSP-1, during a visit to the company's Hamamatsu headquarters last December. So convincing was the spread of sound created by the box that I found myself turning around to look for rear speakers that were not there!

When I got my hands on a sample earlier this year, the YSP-1 had lost none of its impact. I concluded that while the unit could never replace a full 5.1 or 7.1 system, it was one of the best 'compromises' I had ever heard, and leagues ahead of competing virtual-surround technologies.

The YSP-1 sold in the UK for a mere £800. Needless to say, sales exceeded even Yamaha's expectations. Part of the reason has to be a practical one - most British punters live in small homes that are hardpressed to accommodate the kick-ass multi-speaker sets we would all like (ask yourself why sub-sat systems do so well here!). The 'Spouse Acceptance Factor', to use the non-sexist term, spurs us into sacrificing performance.

The YSP-1 took analogue and digital feeds directly from the sources, and did the rest. The only other connections were a video output for onscreen setup purposes and a feed for a subwoofer. Spoil the 'one-box' approach it might, but a sub was essential for serious sound because the YSP-1's bass-response as somewhat restricted. Thankfully, it's easier to 'hide' than the other speakers of a traditional 5.1 pack.

At around £600, the YSP-800 is even more affordable than its similarly metalgrilled predecessor - yet it improves on the specification by including a version of the advanced microphone-based YPAO (Yamaha Parametric Acoustic Optimiser) auto-configuration system built into the company's AV receivers. It has been designed to sit beneath 32in flatscreens.

Part of the reason for the lower cost is that the number of steerable transducers has been whittled down still further to 21; each of these 4cm drivers is powered by its own 2W amplifier. However, there are still two of the 10cm bass/mid drivers, driven by a pair of 20W amps. But has the continuing simplification of the design had any effect on sound quality? Setting up the unit couldn't be easier.

Specify the room size/shape/location using the onscreen graphics (again, a composite feed to your display is needed here), tell the unit if you're using a subwoofer, plug the auto setup mic into the front panel and place it in the listening position (at least two metres from the unit).

The subwoofer connects via a rear-mounted phono socket - an 'active' design with its own amplifier is needed; note that Yamaha recommends setting its crossover frequency to 150Hz, something that's not mentioned in the manual. After invoking the auto set-up system, the YSP-800 emits a space-age series of thumps and squeals as it attempts to fathom out the kind of environment it's been placed in.

The information thus gathered is used to calculate the levels and delays of the beams that convey the multiple channels of a surround source. We found the automatic set-up system - which has separate phases for beam and sound optimisation - to be reasonably foolproof. However, it's possible to manually configure the unit á la YSP-1.

The YSP-800 has two analogue inputs, plus one coaxial and two optical digital inputs that will accept stereo and 5.1 bitstreams.. The coaxial input is marked 'DVD', but if your player is optical-only (Panasonic, for example), there's nothing to stop you from pressing one of the optical ones into service. In terms of surround modes, the YSP-800 supports Dolby Digital, DTS/Neo:6, Pro-Logic and Pro-Logic II (Music/Movies).

Various 'beam-modes' allow different speaker configurations to be simulated. In addition to the full-monty '5-Beam', available modes include conventional (2-channel) stereo and '3-Beam', which simulates a front-and-centre configuration. There's also a single-channel 'target' mode for late night listening - so-called because the beam can be steered towards a particular roomposition (bedsitters can, for example, enjoy clearer dialogue while they wash the dishes!).

Note that, depending on your room configuration, not all modes might be available to you. Installations in which the YSP-800 is angled are particularly troublesome in this respect.

Other features include SRS TruBass, late-night listening modes and three of Yamaha's acclaimed DSPs (music, movies and sports). You also get the YSP-1's front-panel fluorescent display - which can be dimmed or turned off altogether - although cost-cutting has eliminated the RS232 control port.

So how did it sound? When I first configured the YSP-800, I found that while there was a good spread of sound from the front channels, the same couldn't be said of the surrounds. Bringing forward the unit slightly, and rearranging some of the furniture in the room paid dividends. Further benefits were achieved by manually-tweaking some of the automatically-derived settings - notably the horizontal angle of the beams.

The result is a remarkably-expansive soundstage from movies like Matrix Revolutions and Hitchhikers Guide to the Galaxy - far superior to other virtualsurround technologies I've experienced.

It's not as compelling a substitute for a full surround sound speaker package as the YSP-1, so those extra transducers must count for something. But there's no doubt that the YSP-800 fares exceptionally well for a £600 product that effectively replaces both an AV amp and speakers. Dialogue is always intelligible and - after the initial burn-in period - surprisingly uncoloured.

In my viewing room, which is fairly representative of the average British lounge, the YSP-800 was capable of pumping out sizeable quantities of sound before distortion noticeably set in. It must be said that the subwoofer, which is essential in my view, will take some of the load off the Yammy.

The YSP-800 represents probably the best surround sound compromise yet seen between performance, price and domestic bliss. It's not perfect, and for the best results demands a room that's uncluttered. But for those who had given up on finding a quality compromise for 'virtual' surround, it offers convincing salvation. Martin Pipe