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Optical has to go first from the S/PDIF electrical output to a laser-diode, which transmits the signal as light pulses over the optical cable, then optically sensed at the other end and converted back to the base electrical S/PDIF signal. The toslink technology, however, is transparent, (read "it works") so it should make NO DIFFERENCE which link you use. Toslink is free from hum and interference in theory, but in practice, both kinds of connections are just fine, and the kind of XLR cabling is entirely unimportant, in counterpoint to strobl's answer. PROOF: All these Internet webpages and emails go digitally over miles of unshielded twisted pair phone lines, converted to high-bandwidth fiber optic and back, etc.etc. and one asks if the phone companies and ISP's using "silver coax" to "improve" the signal? You CD's S/PDIF output at 44.1kHz is no different than your modem's 56kHz signal. Is strobl buying silver interconnect from his computer to his phone jack? HA! I doubt it!
Optical connections are inferior to coax (RCA) or balanced connections. I recently added an outboard DAC to my system (MSB Link). I have 2 CD players - one with a Toslink (a Sony - I know, I'm embarassed) and the other with a coax digital out (a Philips CD Recorder - hey, it was for my wife). I had done A/B listening tests with these CD players shortly after I bought the Philips and heard no difference. The Link DAC has 2 inputs - 1 Toslink (optical) and 1 coax. So I could plug both of the players into the DAC and do A/B on Toslink vs Coax and decide for myself if Toslink was as bad as everyone says. It is. The music sounds a lot "flatter" with the Toslink connection. So If your choice is between Toslink and coax - go with the coax. If your optical connection is AT&T, that's a different matter - I've read that that's agood system, however, I have never listened to it. Either way, Toslink cables are cheap (about $30) so why not by one and listen for yourself - then you can decide with your own ears (the best way always). Good luck!
Back in my university years I did a lab experiment on the quality of optical fibers. I can assure you that the plastic fiber used in toslink is far inferior that the coaxial copper cable, suffering significan signal losses. Glass optical fiber (known as AT&T in hi-end circles) is the best medium, but is terribly expensive.