When does Cabling become important in Digital?

Depends on what digital you are talking about.

S/PDIF coax is very sensitive to cabling because the jitter of the signal is affected. Jitter causes frequency modulation distortion on the output of the D/A, so it must be minimized.

USB is also sensivie to the cable for all types of interfaces because of either jitter, RF or common-mode noise.

Here are some guidelines for S/PDIF coax:

http://www.positive-feedback.com/Issue14/spdif.htm

In general, if a cable is built to the correct impedance, uses good silver conductors and teflon or expanded teflon insulation, it will be a decent cable. these types of cable are not cheap, usually $400 and up.

Cables like USB or firewire to an external drive do not factor into the D/A so they are only data and having really low jitter does not matter. Likewise for Ethernet cables.

Steve N.
Empirical Audio

A big, It depends. I have found using a very good USB cable from my Mac mini to the DAC did make a difference over a cheaper cable. In this case, I started with Audioquest Coffee and went to a AQ Diamond pure silver cable. The difference came in a smoothness to the sound. It just sounded more refined.
I gave up a long time ago about the why's, I can only say it does.
I always keep cables as short as possible to avoid as much degradation from the cable as possible. I'm now debating on another Diamond FireWire from my outboard memory to the Mac.
The analogue cables from your DAC to the preamp fall into the same camp as any cable from any component.
I agree with the poster above about timing issues. That's why I use an asynchronous DAC.

Septemous, If you send digital data over wireless or network it will be delivered as data without timing and anything on computer side doesn't matter. What matters is timing (clock) recreated on the other side. When you transfer sequence 10101010 to D/A converter stability of timing (clock) becomes important. When edges don't come in uniform time spacing we call it jitter. This jitter is a form of modulation that creates additional analog signals. With complex signal there will be a lot of additional frequencies at very low level - basically a noise. This noise will be proportional to sound level and not detectable without signal. It is loss of clarity that affects everything from timbre to imaging. Cables can add to signal jitter by either allowing electrical noise to enter the cable (poor shielding) or by creating reflections inside of the cable. In either case transition edge becomes jagged. Since level is recognized at certain voltage (threshold) jagged edges will make jittery timing of A/D conversion. Noise is obvious but reflections need explanation. Fast transitions will create reflection (that will add back to signal) on any change in characteristic impedance of the connection (driver, connector, cable, connector, receiver). This characteristic impedance is pretty much square root of inductance over capacitance Zo=SQRT(L/C) and is defined by cable's geometry and dielectric.