It's the difference between *encoding*, *compression* and *format*. As was mentioned above, a Redbook audio CD is *encoded* at 16 bits and 44.1 KHz. That describes how the original recording was encoded into the digital CD format. You must have a DAC capable of decoding the encoded digital bitstream. A 16 bit, 44.1 KHz bitstream needs a DAC capable of accepting that digital bitstream. If you have a DAC capable of accepting higher resolution encodings, you can only take advantage of that capability if you send the DAC a bitstream encoded at a higher resolution, like 24 bit, 96 KHz. Sending a Redbook encoded bitstream (16 bit, 44.1 KHz) into a DAC capable of higher resolution really does nothing - It's still a 16/441.KHz encoded bitstream.
FLAC and MP3 are simply formats for storing and compressing digital audio. FLAC is lossless compression with a variable bit rate. MP3 is lossy compression with either a constant or a variable bit rate. This bit rate is referring to the *compression*, not the encoding. The DAC doesn't see the format or the compression - this is handled by the playback software. The playback software reads the compressed file format (FLAC, MP3, AAC, ALAC, WAV, etc) and creates the bitstream that is sent to the DAC. The DAC decodes the encoded bitstream and creates an analog audio signal.