DAC stands for Digital Audio Converter. It converts all of the ones and zeroes in a digital stream into sound. Without a DAC all you would hear is a bunch of clacking, but no music. It doesn’t matter whether the digital stream is an un compressed stream, such as FLAC, or a codec that uses significant compression, such as mp3. Ultimately, the digits need to be turned into sound by a DAC.
Most computers have DACs built in to their operating systems, which is why they can play music or reproduce speech. They tend to be low quality and the sound can be significantly improved by letting a separate external DAC. CD, DVD, and Blu Ray players also have their own DACs