It is a jack that does both standard analog, and optical digital, on the one connection.
You can plug in a standard mini-headphone (1/8") like most iPod/music devices use, including 1/8" to two cable Y adapters for plugging into stereos, etc.
You can also buy a funky adapter that looks like a standard mini-headphone adapter, but it is plastic and has an optical jack on the back where the cable would usually be. This allows you to connect the MB digitally to any equipment (like a home stereo receiver) that accepts optical input, or plug things like CD players, DVD players, etc. into the MB's input. If you check out the online Apple Store, they sell a Belkin kit that has the adapter with a short optical cable and they have a picture so you can see an example.