probably the best way to do this is provide a high level of what is required then everyone can chime in with their solutions. There are number of ways of achieving a home theatre system. I'll provide what to do with a PC but there are other ways, so if you have other methods, then post as a response to this.
So obviously you need a pc. You also need a display of some type, be it a tv, or a projector or something else.
If you are going for a tv, then you don't necessarily need a smart tv. The idea is to move all the smarts off the tv, and into the PC.
If you have a smart tv and want to use that you can, but it will limit you in what you can do. For example many new smart TVs have a number of apps eg Netflix that you can use. However if you are just using the tv, you are reliant on the tv manufacturer providing the app.
Before got out and buying a brand new tellie for the latest app, consider what will happen when the next big thing comes out. In my case I forked out for a flash smart tv when they first came on the market, but the vendor now no longer provides updates to the software, so no Netflix app for me. Luckily I offloaded all the smarts to my PC , so I've been watching Netflix for well over a year! Spend the money on a good picture, not the flashy smarts.
The PC is another story for another post.
For high definition tv, play blu Rays etc, you need to use a special cable or two called an hdmi cable to link everything up. The reasons behind it are around having a "pipe" to send all that high definition goodness down. Also using he I there is no way you can extract the content and record it anywhere, which makes it perfect for ensure copyright is maintained. So you will need hdmi cables connecting all your equipment right from source, right through to output.
Finally you may want to run the lot through your stereo. The modern day version of a stereo is an audio video receiver or avr. Again you can spend thousands on that and a speaker set
Sounds simple? Well there are lots of variations, but the ability to find a solution that fits almost any budget and need is what makes it interesting.
Feel free to post your questions and contributions on the board