DAC stands for digital to analog converter. ADC stands for analog to digital converter. a digital output typically will not pass through a DAC until right before it gets amplified, but it could go through an ADC if the source is analog but output as digital. ideally it would start as a digital signal (cd, dvd, sat, etc) and continue as digital as long as possible. though with say a turntable it would be analog the whole way typically and some people enjoy that.