High Fidelity-HiFi, it increases the higher notes, but more importantly, it helps with clear voice recognition for a center speaker, if you don't have a reciever/are using computer box speakers, chances are you won't be able to tell a difference.
^ speakers won't affect fidelity, if you have high quality speakers and a cr@p source, those speakers will sound like cr@p. Its all about equality. If you have cr@p speakers and a quality sound card, you won't be able to to tell the difference between a cr@p source and high quality source. Its all about equality of the source and speakers and knowing how to balance them out.
the hifi settings is just no more thena special eq... if u have very good speakers you wont need that extra treble boost. software effects are never really that good, and they always effect the overall output in some ways whether or not u can noticably perceive it.