Originally Posted by murphy
I'm not sure I believe that's the reason the ipod doesn't have digital out. Macs have one, as do the airport routers. I think Apple's just being cheap.
If you want better sound from your ipod (less hiss, etc.), the dock connector's output is much cleaner than the headphone output.
The use model for the iPod is portable by nature, so Apple did not see S/PDIF output as important. It's actually pretty cheap to include a S/PDIF transmitter for optical output - not so cheap for coaxial. With the iPod and other portable music players now gravitating to home use in docks, a digital output can improve the sound quality by eliminating one or to conversion points. But I do think they are hung up on DRM issues.