Here's our RD's reply regarding to your question:
Direct-Stream Digital is simply a 1-bit digital audio format that is based on the Sigma-Delta encoding/decoding architecture, and in practice is commonly referred to as a DSD recording/file.
Many are not aware though that whether they are employed in the processing of PCM or DSD signals, all modern DAC chips are actually based on the same basic 1-bit Sigma-Delta architecture. In short, the only real question is whether we're sending a PCM or DSD signal to be decoded by a Sigma-Delta DAC.
With respect to PCM, the incoming data is first converted into a 1-bit Sigma-Delta signal internally and then it is processed by a following Low-Pass Filter stage. In the case of DSD, the signal is directly decoded by the DAC, which skips the Sigma-Delta conversion part of the process and then utilizes the Low-Pass Filter stage. The difference between the two formats is like comparing 10 dimes with a 1-dollar bill and trying to determine which is better. In one case where you have just a coin purse, 10 dimes is better. In the case where you have a wallet though, the dollar bill is preferable. In either case though, you still have the exact same amount of currency.
Therefore, no matter how you view it DSD and PCM are nothing more than different ways of looking at the exact same thing. While there are differences, where and when the data is converted is of little practical importance with respect to the end result.
However, one should note that the DSD format was originally developed to facilitate conversion to the 44.1kHz CD standard; hence, the PCM equivalent of a 2.8Mhz DSD file would be manifest as an 88.2kHz file at 20-bit resolution. Compared to a 24-bit PCM file, DSD delivers a dynamic range that is actually 24dB less. Similarly, a "double" 5.6Mhz DSD file is the equivalent of a PCM file recorded at 176.4kHz and 20-bit resolution.