Purpose of a DAC and Redbook Presentation

A dac is a digital to analog converter. It converts a digital signal, ones and zeroes, into an analog signal that is then amplified by your preamp/amp and sent to your speakers. "Redbook" simply refers to regular 16 bit/44.1hz cd's, as opposed to one of the hi-rez formats like SACD or DVD-A. That's it, hope it helps.

To elaborate a bit on Jond's answer, the box most people refer to as a 'CD player' contains two main parts, a transport that spins the disc and picks up a digital signal from it and a DAC (or D/AC) that does the job Jond described, converts a digital signal to an analog signal that can be altered and then amplified by your preamp and amp (which can also be in a single box called an integrated amp.)

You would benefit from buying a DAC if you own a transport-only box that requires a separate DAC or if you wanted to take the digital signal from a regular CD player, via a 'digital-out' connector, and use a higher quality, separate DAC, bypassing the internal DAC in the all-in-one CD player in a quest for higher quality.

Purpose...The DACs you see are "outboard" units that can be substituted for the DACs that you already have inside your disc player. In the bad old days, players often had inferior DACs, and sonic quality would be improved by using the outboard unit. But, beware! The quality of run-of-the-mill DACs has improved greatly in the last year or so, and even an inexpensive player may have DACs superior to an expensive outboard DAC that is a few years old.

If you do not have a coax out on your cd player forget about a dac and get a new player. toslink sucks.