Apple Powerbook "Optical Digital Out"

I just bought the new Powerbook (got here yesterday). I am thinking about scrapping my cd player and using this exclusively through some USB DAC(maybe the wavelength or sutherland) but the comp says that one of the audio outs is an optical digital signal but to me it looks just like a headphone jack. So can someone explain what this is and how it works and if there are and DACs that will connect to this sort of output. Also, is it even worth it or should I go the USB route? Much thanks for any help