HDMI can send audio/video information to a device in digital format while Component Video must convert a digital signal to analog in order to interpret the information.

HDMI
Theoretically, an all digital connection is preferable when connecting two devices together in your Home Theater. However, while an HDMI connection can be all digital, it's not always error-free and can degrade, particularly over longer HDMI cables.

Since HDMI does not have error-correction, once information is lost it cannot be recovered. That can be a consideration when you need to run HDMI cables over a large area. Generally speaking, the shorter the HDMI cable, the less degradation and signal loss should occur.

Another factor to consider is that since digital signals are encoded in different ways, they require "digital-to-digital" conversions to occur. Sometimes "digital-to-digital" conversions can degrade the signal worse than "digital-to-analog" conversions.

Component Video
Component Video is considered the best analog video standard to connect two devices together in your Home Theater. Unlike HDMI, it does have error-correction capabilities which means it will degrade the signal less over longer cable distances than HDMI. However, since it is analog, it will degrade some due to the "digital-to-analog" conversion that occurs when it receives a digital signal.

Which is best for me?
How all of this translates to your audio/video experience with your TV, DVD, and other devices, depends on many factors: 

• The capabilities of the connected devices.
• Whether the video device is displaying video in it's native resolution or not.
• The length and quality of the cable you are using.

These are factors that will be unique to your Home Theater setup. You may find that you get a better entertainment experience from Component Video than HDMI even though HDMI is the digital standard.