Explanation please.

Optical cable from imac to Sony MDR - assuming you want to use it as a dac.

maybe confusing because the same output provides digital AND analog signal? at least that's the case with my 3.5mm headphones output on my macbook - I assume iMac uses something similar.

You need a 3.5mm jack to optical lead from the Mac's optical out to the MDR's optical in and then the usual connection to your 82 - when the MDR is set to play its source you should hear Mac music through the Sony DAC

Works with my Yamaha CDR - sounds atrocious though.

Thanks guys I have the required bits,and understand the connections, but my question is what is the gain of adding another set of connections and Dac.
If (as I assume) it is to improve the Macs output why should the optical do that?
Or not if ROTFs findings sound out.

I think you're asking "what is te advantage of using the Sony MDR as a DAC?"

Back to basics (hopefully not being patronising) every digital device needs a DAC (Digital to Analogue Converter). In many cases these are built into the device and are a small IC (chip) with a small amount if associated analogue circuitry. As you can imagine, depending in the device (cost, etc.) this IC and circuitry vary greatly in quality. The standard output on any computer is about as basic as it gets so using the optical cable to your MDR will allow tge computer to play via the DAC in that. Beyond the MDR, you can buy standalone DACs which vary in cost / quality from basic upto the Naim DAC and beyond.

Eloise