DCS versus DCC
Please note that it is the Protosound 3 decoder that can operate under DCS or DCC digital control (or indeed traditional analogue). All the MTH Ho locomotives are available with the Protosound 3 digital decoder, as are the O gauge Premier range of american and european locomotives that have been arriving since late 2010. The earlier Premier O gauge, all RailKing O gauge and all gauge 1 and tinplate Protosound locomotives announced so far have the Protosound 2 decoder, which is a fully competent digital decoder and sound system for the DCS or analogue but which does not claim DCC compatability.
If you already operate an established model railway on a variable voltage control system (the traditional resistive or variable voltage mains powered transformer/controller, or indeed one of the pulsed/chopped units that perhaps has momentum simulation) then conversion to "all digital" may be a step too far on cost grounds, particularly if you have a locomotive roster of any size. MTH locomotives that have a Protosound DCS decoder fitted will default on receiving power to an "analogue" mode, variable speed forward and reverse depending on track polarity in the normal manner with a default set of sound effects and smoke as may be appropriate. As such they can be used in conjunction with other brand traditional locomotives though to obtain maximum speed or power the MTH locomotives may need 16 rather than 12 volts. Please note that a pulsed controller may output a waveform that that is mis-interpreted by a DCS decoder.
If you happen to like the idea of operating one or more MTH locomotives under the DCS system, so as to be able to use all of the features such as the powered (un)couplers, then there is nothing to stop you from feeding a section of otherwise isolated track from a DCS controller and running one or more MTH locomotives under DCS within that section whilst the rest of the layout runs under traditional variable voltage. If you had a marshalling yard that can be isolated from the main line then you could for instance shunt under DCS whilst the main line operated on analogue or vice versa. If you are willing to try this then I would suggest that these sections are fully isolated with both rails cut (rather than just one rail as in the "common return" wiring schemes).
The potential advantages of DCS
It is a proprietary scheme and as such the locomotives and controllers are developed directly for each other. Both the DCS Commander and the remote handset for the DCS TIU have dedicated keys for the commonly used functions and so (as long as the track is in reasonable condition) "what you press is what you get".
Communication between the DCS controller and Protosound locomotives is bi-directional. The controller will indicate when it has located and logged a new locomotive. The display on the TIU remote handset is large enough to make descriptive text possible, locomotive type and cab number for instance.
The DCS Commander is ready to act as a variable dc controller for running traditional dc locomotives. It operates on a dc power system thus if a legacy dc locomotive is put on the track by mistake it is less likely to fry. The DCS TIU can either pass through a variable dc voltage or (if powered by ac) it can act as a variable voltage ac controller on two outputs (though these must then be fed through appropriate bridge rectifiers to provide a final variable dc output).
MTH locomotive motion is based around increments of one scale mile per hour. DCS understands the concept of "lash-ups" (multiple engines controlled as one) and setting these up is relatively simple.
The potential advantages of DCC
It is an open standards system, the NMRA has defined the major commands but others are open to the individual manufacturer or user to play with. There is a choice of controllers and handsets and a range of decoders and add-on sound systems for those who like the fullest flexibility, in particular there may well be a DCC decoder that can be made to fit your older locomotives.
DCC operates on an ac system and therefore if a legacy dc locomotive is placed on a DCC powered track it is unlikely to move (but may vibrate and in the worst scenario may burn out).
There are many more DCC layouts than there are DCS and , particularly in the UK, if you run at a club and it has digital controllers then they are in all likelihood going to be some brand of DCC.
In effect the MTH Protosound 3 decoder covers all the bases, full DCS compatability, excellent default effects under analogue and all the major DCC functions. If you insist on using some of the more estoeric or non-standard manufacturer specific DCC functions then you might have an issue but Protosound 3 remains the best, if not the only decoder, that offers such flexibility in control systems.
To sum up
If you are starting from fresh I believe it will be worth considering both MTH locomotives and then as a seperate issue whether you want to operate them via DCS. If you do decide to use DCS you can be assured that the controllers are matched to the locomotives and you may find that operation is easier than with DCC since most of the features have their own dedicated control buttons. The DCS Commander can be switched to act as a variable dc voltage controller for traditional locomotives very easily. If the TIU is used then it can either be used to pass through a variable dc (or ac come to that) voltage that it is fed with or, if it is fed from a fixed voltage ac transformer, it can provide a variable ac output on two of the four outputs (which could then be rectified to power dc equipment).
If you already have a purely DCC control system then there are two options with regard to diesel prototypes. Firstly you can opt for the cheaper "DCC ready" versions and then add a third party DCC decoder of your choice. For some people the DCC facilities that are part of Protosound 3 will be perfectly adequate and for others they will be a limitation. Only you will be able to judge as to whether these issues are insurmountable. With regard to the steam and electric prototypes then either you can use the Protosound 3 decoder or (and I appreciate that there is no rebate in doing so) you have the option of unscrewing the locomotive body, removing the MTH decoder and wiring in your own unit.
If you have a mixed or switchable legacy/DCC system then the same applies with the additional option of running the MTH locomotives on the plain old variable voltage sections.
If you have a traditional variable voltage system then you ought to be able to operate any MTH locomotive with it's default sound effects. You may want to increase the maximum output voltage if you have the means to do so.
If you already have invested in DCC and are undecided regarding a potential MTH locomotive then, if you are considering one of the less expensive Protosound diesel locomotives, might I suggest that you look at the cost of your usual DCC decoder (and sound system if required) added to the cost of the DCC ready version and compare that to the DCS Protosound equipped version. If the price favors Protosound then perhaps it would be worth a trial, if the MTH decoder does not perform as you had hoped then you have the option of performing minor electronic surgery and replacing it with a DCC decoder. You will at least then know for certain whether the DCS decoder does what you require and you will know whether to consider or avoid those locomotives which do not currently have a DCC ready option.
If you want to have the least expensive method of examining DCS then perhaps you could consider the 81-400x-1 Ho series of "F3 ready-to-run sets". These contain a Protosound F3 diesel (being realistic the choice is limited to ATSF or PRR), three items of freight stock, a loop of track and the DCS Remote Commander controller. All you will need is a mains power supply that can output an amp or two at 16 to 20 volts (ac or dc). Please note that the Remote Commander does not have all the individual controls of the larger DCS Comander (or indeed the DCS TIU) but you do get the locomotive, rolling stock along with a bit of track and the controller for roughly the same price as the next cheapest Protosound equipped locomotives.
Finally, I provide this link to the Ulrich Models discussion of DCC/DCS issues.