There has been a lot of interest recently in applying channel coding with side information (CCSI) concepts to data hiding. Part of the interest stems from the fact that information theoretic bounds can be derived for such systems. In this project, we model the audio data embedding problem as a parallel CCSI problem. This is done by dividing the audio spectrum into frequency bins and then treating each bin as a separate CCSI channel. A perceptual mask is derived from the audio signal to determine the amount of power to use in each channel. It acts as a "water-filling" formula by determining the amount of distortion that can be introduced into each frequency bin without introducing audible distortion. As a result, our data embedding scheme will be imperceptible to the human ear. We will show in this project how a variable-rate trellis construction can be used in conjunction with a perceptual mask to embed data. We will also show how the perceptual mask can be seamlessly conveyed from encoder to decoder. An exciting application for our audio data embedding solution is to embed data within the audio signal that will enable surround sound at the receiver. The resulting surround sound system will be better than existing surround sound systems that are based on manipulating two stereo channels to derive the other surround channels.