The Meridian 518 sits between the transport and the DAC; AES input and output.
It does a number of things:
Resolution enhancer, takes the 16bit word length from the CD transport and can enhance it to 18, 20, 22 or 24 bits to get the most out of the DAC (it's more than padding the least significant bits)
Jitter reducer, via twin phase locked loops.
Noise shaping, applies different dither shapes, moves distortion etc.
Digital Pre-Amp, don't have to use it, means you can use the DAC straight into a power amp if you only have digital sources. You can also use it to add gain in the digital domain to low recorded sources to get the most out of the DAC.
Can add Pre-emphasis, only beneficial if the DAC does de-emphasis in the analogue stage, works like noise reduction.
I used one when I had 500 series to great effect, it made a big difference to CD and computer sources, making them sound the same (in a good way), I called it the equaliser.
You can download the manual from the link in my original post, lots of information and graphs in the appendices; it's a complicated unit that takes some understanding, but is really set and forget once in place.
