We report new advancements in, the experimental investigation of the giant optical nonlinearity observed in azo-dye doped nematic liquid crystals. We show that the extreme sensitivity of the azo-dye doped nematics results from a combined action of the trans-cis pholoisomerization process of the ozo-dye molecules and the light-induced changes of the anchoring energy. The molecular reorientation at the surface can be controlled by changing the length n of the aliphatic chain of the ionic surfactant, C,,TAB, used as anchoring agent. Polarization holography experiments show that, during the reorientation, the nematic director mainly follows the direction imposed by the linear polarization along the interference pattern. The diffraction gratings show a large response, proving that all the mechanisms related to light intensity gradients, such as charge migration or thermal heating, may be excluded from the effects that are at the origin of the giant nonlinearity.