Every digital source — a streamer, computer, CD player or phone — ultimately has to hand an analogue voltage to your amplifier, because speakers are analogue devices. The DAC is the chip-and-circuit that does that conversion. It's one of the few places in a modern system where genuine engineering differences are audible, though the gap between a competent $300 DAC and a $30,000 one is far smaller than the price difference suggests.
What actually matters: a clean analogue output stage, good jitter rejection, and enough output to drive your amp. Sample-rate bragging numbers (768kHz, DSD512) make great marketing but rarely change what you hear with normal music.
A DAC can live inside a streamer, an AV receiver, an integrated amp, or as a standalone box. Standalone DACs make sense when you want to upgrade the digital section of an otherwise good system.