Toslinks are very cost effective and have gotten better. There are different grades of Toslink transmit/receive modules and fiber with different data rate. Most manufacturers don't use the best parts. Everything you'd want to know about Toslinks and great prices can be found at:
http://www.lifatec.com/Lifusa_patchcords.htm
I recently A/B'd Toslinks against my AES/EBU cables in my TacT system, which has multiple digital inputs and level controls for each. I normally run the link between my control unit and amps at 192K, but Toslink will not support
this level, so I ran the test at 96K.
When I switched in the Toslink, details were softened, and the soundstage collapsed in all directions. With a live recording like Mulgrew Miller's Live at Yoshi's 1,the
excitement of the live recording was greatly diminished.
IMO, Toslink are very smooth, but if you want to hear everything that's on the recording, AES/EBU still does a better job. I've also tried ST(AT&T) glass cables and their
performance equals or betters AES/EBU. Unforunately, most
manufacturers don't provide these connections on their equipment.
In the future we'll see a new interface called the SMI, which will be done via duplex plastic optical fiber and will interconnect video, audio, sensors, computers, etc in our homes. The first model home, using this technology, is being displayed in Germany, at the World Plastic Optical Trade Conference this month.
