Dolby Digital (DD) means the sound is delivered in 0's and 1's. The amp then decodes that.
Sky boxes don't do DTS or anything better than DD so we don't need to worry about anything further up the scale. The other audio format Sky uses is analogue stereo. You get this when you connect up on SCART to a TV or via phonos to a basic amp for example. You can also get this via the optical connection as a format called PCM (the 0's and 1's version of analogue stereo in this case). The good news is that your amp will recognise this and alter its processing accordingly.
DD doesn't have to be a multichannel surround signal (DD 5.1) though. It can just as easily be stereo (DD 2.0), 2 channel plus sub woofer (DD 2.1) or even mono!! (DD 1.0). All DD means is that signal is in the form of a stream of 0's & 1's which represent one or more discrete channels.
So, what's coming from the Sky box set to "Dolby D" is a set of 0's and 1's. If its DD it could be full 5.1 surround, or stereo, or even mono depending the movie or TV program being shown. If it's PCM then that's the digital version of stereo.
So now we know a little more about what's coming out of the box let's have a look at what the amp does with it...
If your amp is set to "Direct" then you should hear DD in whatever format it is broadcasted as - 5.1, 2.1, 2.0 etc (note: what your amp does with bass depends on the Speaker Settings).
If the source is digital stereo (PCM) then you'll be able to use ProLogic (PL/PLII) to create a surround effect from data hidden in the stereo TV signal using Dolby Surround encoding. DTS Neo should also be available to you if fitted on your amp.
Stereo is 2channel + sub (usually) and would be used for stereo sources (PCM) where you wanted the additional feature of your amp to be available such as control of bass & treble but don't want sound all around you.
Pseudo-surround and acoustic effects (Hall, Jazz, Concert, Theatre etc) are used for stereo only sources. TBH, they were a bit of a fad from the 80's & 90's before proper surround-sound encoding was available.