SP/DIF is a way of sending sounds (usually stereo) in digital form between two devices.
SP/DIF connectors on modules usually looks similar to RCA connectors.
As an example,
a Focusrite Trakmaster preamp has an option for a digital I/O card, which sends data out digitally, rather than in analog form.
A Roland XV 5050 synth module has a SP/DIF digital output on it.
A Lexicon MPX-500 reverb/fx unit has SP/DIF inputs and outputs.
An Echo Mia or Soundblaster Audigy soundcard (among others) can then accept data in via their SP/DIF port from the above devices, and send data out digitally.
The advantages are that the signal is not subject to noise or interference, making the recording quality very accurate.
The disadvantages of having multiple SP/DIF sources are that in order to mix them, you need a digital mixer like
the Roland M-1000, so the mixer technology is still evolving at lower price points.
