I'm just reciting from the book 'An Introduction To Digital Audio', by John Watkinson, Focal Press, which I read a while back. This is the technically correct way of describing how any digital channel works, like the Toslink interface. The transmission medium itself is analogue, and is susceptible to distortion and noise. Hi Ho said that 'if you receive a signal, it is perfect' - this is not true, it will have noise, distortion, and jitter. The original digital information can be obtained from this by interpreting all voltages/current/light intensity above a certain threshold to be 'on', and all below a certain value to be 'off'. Jitter is rejected and the signal correctly clocked by using a phase lock loop. The use of a coding scheme is essential in transmitting the digital data. How the digital information is reproduced correctly so that the cable becomes transparent is a subject of some detail.
Hi markw,
The distinction between when the data is analogue or not was not made by me. When digital data is sent over distances it is sent over a 'channel'. The design of channels is a separate subject from when digital data is kept in an electronic circuit.