Head Related Transfer Function. It relates to models of how we percieve directional audio. HRTFs for stereo headphones simulate directional sound over headphones. Instead of being like a speaker strapped to each ear it's supposed to sound more like the way we actually perceive sound. HRTFs are indivicual, almost like our fingerprints. With generic ones like Dolby headphone we might get lucky and find we have a decent match. We might not.
5.1 and 7.1 can both be simulated. However that's essentially 2D audio. The audio is represented on a flat plane. Back in the early 2000s Creative (via their Aureal purchase) could simulate 3d sound using stereo, quadrophonic speakers or headphones in any DirectSound3D game, using something called an elevation filter. Then came Windows Vista and we regressed. A lot. And the vast majority of games went back to 2d surround at best.
Better now are the few games that support 3D audio. In those cases you don't want 5.1 or 7.1 speakers to be simulated. Instead the game (in conjuction with something like Dolby Atmos or DTS X) directly simulates the sound sources directly in 3d space utilising HRTF algorithms and headphones to give a binaural simulation. If you have an atmos or DTX-X combatible speaker system they will use that if you're plugged in via HDMI.
When simulating 5.1, Dolby Atmos headphone sounds very much like Dolby Headphone. It comes into its own with genuinely 3d material. Atmos soundtracks in Netflix work (first episode of Daredevil's good for overhead thunder) via the Netflix app, as do atmos games (list here:
https://docs.google.com/document/d/1uAklgDNC_LBOYSBbIzBeso6I4laForovIWiTYx6Ss8k/edit).
Edit: You can try Windows Sonic, which is free, or DTS Headphone X (Via Windows Store). I'm not 100% sure whether soundcore 3D on the Soundblaster Z handles 3D audio properly or not. It will certainly cope with 5.1 simulation. CMSS-3D on the older creative X-Fis certainly did - but it had options to enable or disable Macro-FX (simulates close directional sound) and elevation filter. Those are absent on the Soundblaster Z control panel.