Digital output has volume control?!? How is that possible?

a digital signal is a lot of numbers (samples) with a value which is the value of the signal at the time of the sample

so a long line of numbers representing the audio signal

if all those numbers are lowered by X then you lowered the general digital audio signal volume

same deal with raising it

that some systems fix the volume and let the receiving end which handle the DA process handle the volume does not mean that a digital signal can't have a volume factor

The AirPort Express has a built-in DAC. This is because the base station's audio port supports both analog and optical-digital audio outputs. All audio streamed to the Express will be digital, of course. Depending on the type of audio cable you use (stereo mini-jack or TOSlink with a optical-digital mini-jack) will be the type of audio that the audio device on the other end will receive.