Stereo Definition

Alan Blumlein, who worked at EMI in England was responsible for the first developments in stereo. In 1931 Blumlein filed a patent where he describes a two-channel(speaker) method of sound reproduction, this patent was accepted in 1933. It also covers some other developments in audio and television technology such as, Binaural recording and the Blumlein Pair; a stereo microphone array consisting of the matched microphones with figure-of-eight polar patterns positioned 90 degrees from each other:

 Blumlein Pair

http://en.wikipedia.org/wiki/File:Blumlein_-Stereo.png

accessed: 10/04/13

Blumlein describes in patent 394,325 (entitled: Improvements in and relating to Sound-transmission, Sound-recording and Sound-reproducing Systems) a method of reproducing sound with two speakers which is known to us today as Stereo:

Blumlein's drawing of Stereo Speaker System

http://www.doramusic.com/patents/394325.htm

Accessed: 10/04/13

The same year that Blumlein's patent was accepted, 1933, there were other developments in stereo reproduction in the U.S by Bell laboratories. They transmitted audio by high-bandwidth telephone lines from the Academy of Music in Philadelphia to the Constitution Hall in Washington DC.

Bell Labs described a 3-channel system consisting of left, centre and right speakers. This speaker system is now used today in the 5.1 standard format. They concluded that an infinite number of loudspeakers is preferable, however the left, right, centre set up was a "practical" approach to representing and infinite number of speakers. 

A conductor named Leopold Stokowski operated 3-channel level and tone controls for the 3-channel system in Washington DC, while the audio was transmitted from the Philadelphia. A curtain was covering the stage in washington DC and to the crowds amazement, when the curtains were raised they were not watching an orchestra but rather a set of 3 loudspeakers. 

References:

PATENT SPECIFICATION

Application Date: Dec. 14, 1931. No. 394,325

Complete Left: Nov. 10, 1932.

Complete Accepted: June 14, 1933.

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PROVISIONAL SPECIFICATION

Improvements in and relating to Sound-transmission, Sound-recording and Sound-reproducing Systems.

Alan Blumlein

Holman Tomlinson, 2008,

Surround Sound Up and Running,

Second Edition