Hey,
An optical output is digital, yes, but it also transfers information across a fiber optic cable using pulses of light. The advantages of this are many:
1. You can transfer a ton of information using optical connections. In the case of ADAT optical, you can transmit 8 channels of 48khz 24 bit audio (is that right?) using a single cable.
2. Because it is digital, there isn't any 'conversion' to be done, as the information has already been digitised.
3. You don't have to worry about EM (electro-magnetic) interference from other sources (like other equipment or radio stations) or ground loops.
Earlier someone posted a problem they were having with a piece of equipment pick up radio frequencies in their studio, this was because there was some sort of 'loop' made in their studio which acted as an antenna, it picked up a local radio frequency (which is a type of EM wave)...if he only used optical equipment, there isn't a physical connection which can close a loop, and therefore there isn't the same interference with that particular piece of gear.
I know that someone cannot use 'only' optical equipment, I'm just making a point...
If you pop off the cap on the optical port, you can see a little beam of red light coming out of it...that's AUDIO!
A lot of professional studios with use ADAT soundcards in their computers because they can choose to use higher quality external converters in a rack unit...the mics/synths/etc. get plugged into the external box, it converts it from analogue to digital, and the digital signal is sent down the optical cable into the computer through the ADAT card. The advantages are a cleaner signal, more choice in which convertors they use (Pro Tools only let you use Digidesign cards; the workaround is to plug your own converters into a Digidesign ADAT card), and less wires.
I am in no way and expert in electronics, if someone knows differently or better than me, feel free to amend/correct my response.
Nick