The first all-optical systems will emerge within the next five years, or sooner depending on how quickly Lucent Technologies can make their optical switch a viable method of handling signal transfer.
The business end of audio, the loudspeaker, offers much potential as a digitally driven device. Unlike the optical switch, however, the range of subjective expression that can go into any qualitative analysis of loudspeaker performance is bound to generate controversy during the gestation of the technology. No subjective expression can be imagined for an optical switch: If it works, it will be seamless.
How we connect now...
Depending on the complexity of one's system, digital is converted to analog within the source device (CD, DAT, DVD, MD etc.) using a chipset that supplies a conventional analog output. For a higher level of performance, many audiophiles choose to bypass the internal D/A circuits, by routing the digital signal through a separate D/A converter and possibly a Jitter reduction system. Although it can be argued that the component approach to D/A conversion results in a superior playback signal, the signal is converted to analog in a manner that is fairly consistent with the conversion process already accessible at the source devices' analog outputs. Depending on the quality of the source device, it can very easily match the best that the component approach has to offer.
With the recent emergence of A/V receivers that have digital inputs, music lovers are able to 'go direct' by routing the digital output of their source device directly into a coaxial digital input. Many of the new class of receivers handle all signals digitally, using conventional electronic switches to handle input switching of the electron-based digital information stream. That aside, the approach to handling digital signals locally within the A/V receiver can serve as a useful template to manufacturers when they introduce optical throughput.
The final stage in the process is the conversion to analog at the output stage. The conventional analog signal is amplified to drive the loudspeaker to acceptable levels. There are amplified loudspeakers that are designed for digital signals. In fact, several systems have been around for about a decade. That's a fairly long time, but few mainstream manufacturers have followed the lead set by companies like PHILIPS (who introduced a digital to speakers system to coincide with the launch of their ill-fated Digital Compact Cassette format).
There may be several efficient ways to convert digital signals to a composite signal that can emit sound. They have yet to be formally discovered (or at least definitively described), but should we consider the digital signal as a representation of an analog audio signal, and a bitstream digital signal as a time dependent, highly accurate representation of a composite acoustic wave that can communicate the wave information without translation, then we can make the next conceptual leap to a speaker that works by distributing the composite acoustic over a planar surface that emits sound based on the composition of the waveform itself.
Welcome to the Third Wave. Oh, and don't be surprised to find the Audio Luddites first in line to bash what will be the next step toward a different way of doing things.
http://www.audio-ideas.com/techupdate/3wdigital.html