He means that your motherboard's sound controller (Realtek ALC-850) passes the Dolby Digital surround sound information from a DVD, for example, to your Dolby Digital decoder in your Z-680 control box. Again, if you're just playing back CD red book audio or an MP3, you don't get any surround sound information, only stereo (left and right). The Z680 control box has different effects that can be applied (like Dolby Music, etc.) to butter up regular 2 channel (left and right) audio, but I didn't find them so appealing.
Also, IIRC, I think there's an option in the regular Windows Sound control panel to enable S/PDIF, so make sure that's been checked.
Lastly, I forgot to mention that when I used S/PDIF for regular 2 channel audio, I noticed quite a bit of latency (noticeable pause from when you hit play to when you actually start hearing sound coming from the speakers), so you might just want to use the analog outputs for non-surround sound applications.