Uh oh, I've been called upon, yet don't know the answer. Up to Prologic IIx, Dolby's processing has been pretty straight forward. They just look at the phase/amplitude differential between a pair of speakers (the front when making 4/5.1 from 2.0, or the surrounds when making 7.1 from 5.1), and steer the out-of-phase (surround), or completely in phase but with differing amplitude (center/rear) to where it should be heard. (Prologic II did add amplitude checking to the phased extraction to create 5 channels instead of the 4 from the older Prologic.)
As for IIz, I can only guess. Once I get to hear a setup, I might be able to refine this guess a little more. But I'm guessing they're looking for similarly phased information in more than a pair of speakers. Like in the mains and the surrounds of a 5.1 signal. Something like that would mean that the sound is coming from all around the listener, and would give the impression that it's up above their head. So moving it to the height channel, would be improve that impression.
