I'll see if I can clear this up
Originally Posted by ZBoneCapone
When do I need one and why?
Every digital device has a DAC and amp. I'll rephrase your question as "do I 'need' better ones?" It depends. I'll be honest, I'm not that kind of guy who spends $$$$ on expensive amps, DACs, and cables primarily for sound quality alone. If I were to spend money on recabling my headphones, then it's for length, durability, and aesthetics; Justifying it solely on SQ "improvement" is something I'll never do. I prefer to spend more of that money on different headphones/speakers to acquire different sound signatures than amps and DAC. I can't tell night and day differences between amps* vs amps* and DACs vs DACs. In this case I look at their features, specifications, and aesthetics and also see if they match up with my headphones.
*There are amps that may color the sound or have roll-offs in them, most notably some tube amps. However, you'll have to make the choice between sound reproduction (unaltered sound) or coloration (altered sound).
First start by creating a list of criteria on what you need or want.
Are you comfortable with tube rolling and maintenance? If not, go with a solid-state. However, solid-states focus more on sound reproduction than coloration. You'll have to weigh your priorities.
My headphones are K701 and in the future, HD800.
So I need an amp that can:
1. fully reproduce the sound as best as possible
2. come with a bass-boost feature to give the K701 a boost
3. Can drive low and high impedance headphones without distortion or problems at higher volume
4. Require little to no maintenance
5. Budget <$600
Running these cans out of the back of a PC did not meet some of those criteria. That's when you upgrade. This lead me to AMB's M³. On the other hand, If running them out of your PC does not break any of your expectations, then don't buy an amp. Although I sure do love the feel of a knob when I'm adjusting volume.
I also got the σ11 power supply. Do I "need" it over the less expensive wall wart? Not at all. It was something that I "wanted" to have. Why? I enjoy DIY and wanted to give it a DIY PSU made for M³ from AMB, no more no less.
As for the DAC, I used to have the EMU 0404 USB, but I sold it. It was sold because it failed my expectations. It did not play smoothly in DAW applications. The drivers were terrible and sometimes the audio drops out. If I wanted a DAC that just plays on iTunes, foobar, or winamp, then I would've kept it. SQ-wise, many of them are so similar that the differences are negligible. Hence why I said to focus on features, specifications, and aesthetics. If you want a DAC that has a low-pass filter starting at 90khz, but want to spend $1000 more for one at 100khz, be my guest. I won't. It's an upgrade in specification, it's better, but not a priority for me.
So the point is, this applies to ANY product. When something doesn't meet expectations, that's when people upgrade to something better in order to meet those expectations. But you'll have to be consciously aware that something is not meeting your expectations before you decide you want to upgrade; it doesn't work the other way around. Everyone's expectations are different hence why I said it depends.