Wayne,
While you could hook up your computer via a digital cable or USB cable to a DAC, the Squeezebox allows you to have physical separation of the computer and the stereo system. This allows you to have the computer in your home office, and the stereo in the basement, for instance. Also, the Squeezebox has analog outs (in addition to digital outs), so a DAC is not required. Of course, you can use a DAC and presumably be able to get better sound.
Things really get neat when you have multiple Squeezeboxes. So if you have a couple different rigs throughout your house, simply put a Squeezebox on each one. Then using the web-based server software, you can designate which songs to play for each Squeezebox, or you can synchronize two or more of them so that they play the same thing. I have 3 of them; one on my 2 Ch system, one on my HT system, and one on my little office system. They're all controlled via the same Linux-based server in my basement. It's really slick.
Hope that helps.
Michael