Digital audio data is essentially just blocks of zeros and ones stored on a CD, computer hard disk, SACD, DVD, etc. This digital audio data represents an encoded set of measurements which need to be decoded and converted into an analogue electrical waveform which can then be sent to an amplifier and then on to speakers or headphones to be converted once again, this time from the analogue waveform into sound waves. A DAC (Digital to Analogue Converter) is the piece of equipment in the chain which decodes the digital data and converts it to an analogue waveform. You cannot hear digital audio data unless it is passed through a DAC for conversion. Any CD or DVD player, mobile phone or computer which is able to play digital audio files must have a DAC built into it. But you can also bypass these built in DACs (which are sometimes cheap and poor quality) and send the digital audio data to a stand alone, external DAC.
Hope this helps.
G