DAC 1 - NAD Wireless DAC
What can I plug into my DAC?
DAC's will usually have a number of inputs. Coaxial and Toslink Optical are the most common, while USB is still also very common.
The Optical and Coaxial connections can have a CD player, network streamer, television, dvd/blu-ray disc player, game console, and some computers.
The USB input can handle pretty much any kind of computer, or a phone with the appropriate adapter (OTG for android, Camera Connect Kit for iOS devices).
What is a DAC?
Every digital device with an analog output has a Digital to Analog Converter of some kind. In the case of phones, televisions, and computers, they are usually stuck on as an afterthought, or just to do the job of creating analog sound to be amplified and played through speakers.
Having a standalone DAC is a worthwhile investment in any modern Hi-Fi system, essentially all the circuitry involved in creating that signal you can hear from the 1's and 0's is housed in its own box, with usually a much better design than what you would find in your television or computer.
A DAC can be useful to connect digital devices to an analog amplifier if the amplifier doesn't have digital inputs. Or if you are after a cleaner, more refined sound.
Things to listen for in higher quality DAC's are separation of sounds (how well you can hear a single voice or instrument in the mix of all the others), "textures" of sounds (raspyness of a bow being drawn across the strings of a double bass), or the clarity of echo's and quiet noises among loud instruments.