Dac Questions from an Analogue guy :

As you can see from my Forum name I am a vinyl enthusiast at heart but do from time to time have digital needs so to speak. Upon learning that my DAC on my old CAL LABS ICON MKII Cd player seems to be dead as there is no audio out of the RCA's I figured I would use the digital coax O/P utilizing a friends PS audio NUWAVE DAC since I have never used the digital coax out before. I figured the player was not totally dead because of the fact that when a CD was inserted into the transport all the of the CD info appeared on the player. So I gave it a shot and voila it worked with very nice results. Simple, done. My curiosity furthered me into the other connections on the unit being the USB and the optical. I gather the Optical acts as a link such as the digital coax from my CD player but the USB connection puzzled me a bit. Having looking at the specs of the DAC, it of course is capable of 16/44 audio but can also do 24/96 and 24/192. Of the 2 latter formats, how are these utilized? Through the USB say using a computer or note pad device? I did not do any research as you can see, so these questions I know are rather rudimentary. Do correct me if I am wrong, is the 24/96, DVD audio? ANyways, my whole curiosity of this is how one utilizes the USB connections and all the higher resolution audio features of this DAC. How is the overall Audio quality of these formats? What are my options if I want to delve further into this? yeah I looked on the Net and saw a huge plethera of products which confused me even more so you can say I am a bit brain lazy when it comes to this whole digital format.
I do have an Ipod with MP3's mostly for my car but I can't see that being the end to be all to be utilized with the Dac since I personally find that this overlly compressed format to be inferior. Anyways, any answers starting from 0 would be greatly appreciated.