Digital Audio Converter is also referred to as DAC generally. What it does is converts your digital information of an Audio CD or any digital audio in to analog information so that it can be amplified by your amplifier to produce songs from your speakers. Your Amp and Speakers understand only analog information,hence the conversion. DAC is a very important part of any audio set up,people spend lacs on them. Eg Very good DACs are generally made by Burr Brown Wolfson Cirrus Logic. Best DAC machines using these chips are made by Bel Canto, dCS,Burmester,Theta Digital, Wadia etc etc