Since the signal is digital, it's either a 1 or a 0. coax and toslink should produce the same audio quality. But since tos uses light beams there is no worrying about potential electrical interference problems. Some say coax sounds better and some say toslink sounds better. I guess it all depends on your ears AND your set up. In my experiences, I noticed absolutely no difference between tos and coax on my relatively low end set up. Coax will cost a lot less then toslink.
Bob, there are a few practical differences, in that toslink tends to be more expensive. Coaxial is cheaper, but can possibly pick up electronic interference over long runs. Other than that, I agree with Steve in that the cable itself shouldn't make much of a difference with a digital signal. FWIW, my Toshiba DVD player uses coaxial, and my Sony LD player uses optical.
You have to have mighty good ears and mighty good equipment then properly set-up I doubt you could hear the difference. I know a "Tweak Shop" that has someone come in and personally audition speaker-wire and I hear them argue over which sounds better. . . I am not very tech. oriented but I have listened intently to music for many, many years. What they claim to hear is way over my head.
I used to use the coax and never worried about optical simply because it seemed logical that with a digital signal there wouldn't be a discernable difference. I did an A/B between the two using AR Pro digital coax and toslink, each cable was 6 feet long.
I hooked the optical to one input on my receiver and the coax to another and just switched inputs from the remote. I could tell that with the toslink connection, sound tended to be a little less "cluttered" on complex passages(movies and music), most everything else sounded the same. I guess most people would say it was more detailed. The change was very little, but it was certainly there and it was certainly better. For a few extra bucks, why not just go with the optical and have the peace of mind knowing you don't have to worry about interference problems.
If you're curious the equipment used was:
Yamaha HTR-5280 receiver(used as pre/pro) Parasound HCA-855A amplifier Toshiba SD-9200 dvd player Klipsch R*-3II speaker system SVS CS Ultra/Samson S1000
Actually alot of people prefer Coaxial more then toslink. The reason is. There's a extra 2 steps in converting electrical data to light. Where in the case with Coaxial everthing stays electrical...
from dvd player ->down coaxial cable -> receiver -> receiver decodes electrical information. from dvd player (electrical)-> converted to optical ($2 part)-> down the Toslink cable -> into receiver (reconverted back from optical to electrical same $2 part)-> receiver decodes it.
Can I tell a difference.. yes. Is it worth to care? no. I find that toslink is alittle harsh.
put on a pair of headphones and try. you'll hear a difference.
I tend to think coax has a beefier sound. but i guess you could just turn it up loud. unless you have you ear up against the speaker you wont notice anything.
I use optical for interference reasons and availability.