Sony PS3 Optical Out to a DAC?


Does any one know if the Sony PS3 Optical Out on the rear panel is for an Audio stream. If so, can one purchase a decent quality DAC like the cambridge (sells for $495), use the PS3 as the transport mechanism feed the signal to the DAC and get a significantly better quality CD signal then an equivalent $495 DC player.
raya
I also have my PS3 hooked up to a DAC. The question in my mind isn't so much whether the sound is good or not from this setup, but whether the sound through the Toslink interface running through my DAC and sound system was better than the sound through the HDMI interface running through my TV speakers. In my case, I preferred the Toslink/DAC route.
I felt that the sound from the ps3 RCA outs was about the same as the optical through the dacmagic. Through an eastern electric dac, I noticed a fair amount of improvement.

With the ps3 the biggest improvement for me was when I set the audio to 44.1khz. The default 48khz sounded pretty dead.
Michelle_kim, "With the ps3 the biggest improvement for me was when I set the audio to 44.1khz. The default 48khz sounded pretty dead." Why is that?
I tried to hook up my PS3 to m y Wadia S7i glass cable and all I heard was a loud fluttering noise.