Digital music files are everywhere these days. They're on our computers and phones. They stream from Spotify, Apple Music, Google Play, and other corners of the cloud. The quality of digital music files varies, but they all have one thing in common. You can't listen to them in their digital form. That's where a DAC comes in.
A DAC (Digital to Analogue Converter) does exactly what the name suggests; turns the digital bits from a digital source material (hard drive/CD/other medium) and converts that information into an analogue electronic signal that our speakers/headphones can use to produce sound.
A higher quality DAC will do a better job of converting those digital bits into the signal, with a more accurate reproduction of the original sound.