PulseAudio is a sound server for POSIX and Win32 systems. A sound server is basically a proxy for your sound applications. It allows you to do advanced operations on your sound data as it passes between your application and your hardware. Things like transferring the audio to a different machine, changing the sample format or channel count and mixing several sounds into one are easily achieved using a sound server.
So I've recently been playing with Pulseaudio to send audio back and forth between the different ubuntu machines I have in my house. If you look at the Frequently asked questions section there's solutions for the most complex setups. There's even one to push audio from multiple machines into one surround mix. It doesn't create AC3 or DTS signals instead multichannel PCM which some surround receiver can decode. Looking at the instructions you can get slightly scared of the commands you need to feed it. But I've found using Pulse Audio Device Chooser which is in the Ubuntu Universe repository you can do most of the simple tasks without touching the command line.
My only problem at the moment is that I don't boot into Ubuntu when using xbmc or Boxee so I don't get a chance to play with the gui device chooser. Plus xbmc doesn't work well with pulseaudio currently. So the main machine plugged into my largest sound source is currently not setup to receive network audio right now. Expect that to change very soon.