SPDIF is a digital audio protocol developed by Sony and Philips. In order to connect the signal to an anologue input, a digital to analogue converter is required. If the source also has analogue outputs, it is much easier to use them - the digital to analogue converter is built into the source and saves the need for an external one.
It might be argued that a good quality external converter can produce a better quality analogue signal than an integrated converter in a DVD player for example. A listening test will help to decide if that is the case.