SPDIF over optical (Toslink), SPDIF over coax or USB
The most important difference is that none of them exist.
It are all standards, so a pile of highly technical papers.
Sonic (dis)advantages are by and large a matter of the implementation.
Toslink is considered to be high on jitter (LED’s are a bit slow) but it is very easy to build a jittery SPDIF over coax to.
The quality of the implementation on both of the boxes is what counts.
AES/EBU – the professional standard, if you ran very long lines, you need a strong signal and a balanced design to cancel out outside electro magnetical interference. Typical pro stuff, rock solid
SPDIF – domestic version of AES/EBU, lower signal, shorter distances, single source, cheaper
Toslink: SPDIF over optical, ideal as far as galvanic isolation is concerned, often jittery and to slow for high res audio.
USB: a lot of USB dac’s are limited to 16/48, go for the modern ones supporting 24 bit/96 kHz.
The type of connection has nothing to do with audio part of the PC.
If you do nothing at all, you simply get the K-mixer in XP or the mixer of Vista.
In case of XP you can go the ASIO way
In case of Vista you might try WASAPI, it bypasses all of Vista’s audio stack.
You need a player like Foobar or J River to be able to acces this driver.
The Well Tempered Computer
Keep in mind that a DAC is more than a choice between optical or electrical connection. The quality of the receiver, the filters, the DAC chipset itself, the analogue stage, all counts.
Personally I prefer USB. It is available on almost any computer. I think an USB dac is a very flexible solution.
Optical out you find on MAC and Toshiba laptops only
SPDIF in general requires a sound card
I suggest to listen to the Benchmark DAC 1 USB, it is a pretty famous DAC with a good price/performance ratio. It not only has USB input but Toslink, coax and XLR are also supported. Listen to it and use it as indeed, a benchmark.
QB9 by Ayre is interesting too, it has asynchronous USB (DAC is the master) and the USB is separated from the DAC by optocouplers. This should reduce jitter (asynchronous) and shield (optical) the DAC against all electrical noise from the PC.
The USB part is a drop-in board. As USB 3 and USB audio 2 are on their way, this allows you to upgrade.
Linux, I had a hard time to get my USB dac to work. However I can’t say that I heard sonic benefits compared with Vista and the interfaces of most Linux player reminds me of Win3, to primitive to my liking.
You can check my website if you want to know my Linux experience:
The Well Tempered Computer