It's fiio k7. It has coaxial/optical/usb digital input. I'm just confused whether these digital connection can "activate" the fiio amp as a headphone amp to a cd player. (i want to use the headphone out). Because those are "digital cable" and amp need "analog cable", or maybe I'm just misinterpreting something here. Am i?
You have a USB input. This accepts a digital signal from a source (computer? Phone?) to the K7
You have an optical input. This accepts a digital signal from a source to the K7
You have a coaxial electrical input labeled "coax". This accepts a digital signal from a source to the K7
You have two coaxial electrical inputs colored red and white and labeled "in". These accept single-channel (each) analog signals from a source.
You have two coaxial electrical inputs colored red and white and labeled "out". These provide single-channel (each) analog signals to send to something else (like an AVR).
The digital inputs are interchangeable (there may be some nuance around protocols on USB, but the two others have identical data simply sent over different physical media. These are what you should be using. They use the DAC on your K7 to convert to analog.
The analog inputs are there mostly as legacy. You use them if there's something in your chain with no available digital out. I suppose you could use them if you needed to bypass the K7's DAC for some reason, but no reason comes to mind.