When I first connected the Audioengine D1 to my computer I was pleasantly surprised that it interfaced perfectly with no configuration effort. Since the short (24 inch) USB cable that came with the D1 carries only the unprocessed digital signal, and the output to the headphone uses the cable that comes attached (usually) to the headphone, there are no cable issues per se that could potentially degrade the sound. Although there were no configurations for me to make the D1 work with my Windows 7-64 computer, the PC volume should be set to maximum and then the D1's volume control knob set to the appropriate listening level.
I knew before I ordered the Audioengine D1 that it was small, but when I removed it from the box it looked even smaller - about the size of a deck of cards but 1/3 thicker. One thing I really like about the D1 which is also true of HRT's HeadStreamer (a similar DAC/amp) is that it runs cool. So far I haven't detected any tendency for it to become warm laying flat on a table, where only the top and sides are able to act as heat sinks. I really hope this is a trend in personal audio, since I've bought laptop and tablet computers recently that get uncomfortably warm.
For those people who have been using the headphone jack on their desktop or laptop computers, and assuming that those computers have USB ports, they should expect better sound using the Audioengine D1 instead of the computer's headphone jack. The fact that the D1 includes both a DAC and headphone amp in such a small package at a relatively low price, suggests to most audiophiles that the D1's sound would be of much less quality than the typical separate DAC's and headphone amps selling for 2 to 3 times the price of the D1.
I don't own the more expensive separates myself, but I have the Objective2 headphone amp that sells (assembled version) for nearly as much as the Audioengine D1 even though the D1 is two components in one. And I don't hear anything to suggest that the D1 has lower sound quality than the Objective2, or that the D1 is less than a good upgrade to the computer's headphone jack for a bargain price. The actual improvement with my computers is a cleaner sound with a greater sense of "space" and "air" around the instruments. My experience in making that comparison taught me that I would not notice a major difference when switching from the computer's headphone jack to the D1's headphone jack. But when you listen through the D1's headphone jack for awhile and then switch back to the computer's headphone jack, that's when you really notice how some of the life goes out of the sound.
An important issue to consider when purchasing audio components to improve sound quality is detail, i.e. how much additional detail will be revealed in the music tracks by the new components. It's possible that a new audio component could reveal existing distortions in the recording in a way that makes them less pleasant to listen to, and some buyers may experience that dreaded feeling of "Uh-oh, I need to buy more stuff", or "Crap - this isn't working out the way I expected". I didn't have that issue with the D1 though - the sound was more revealing but less harsh somehow, and I don't know in this case whether that was intentional on the part of the designer, or whether it's a typical result of upgrading the computer's DAC and headphone amp.
I did have the very similar HRT HeadStreamer DAC/amp on hand to compare to the Audioengine D1, and so I set up two laptop PC's with identical installs of Foobar2000 v1.1.12 and played a few 24 bit 96 khz tracks on them, using the new Harmon/Kardon CL headphone from each DAC/amp's headphone jack. If there was a significant difference, the HeadStreamer may have been slightly brighter with slightly less soundstage or "space". Since one such property as soundstage, brightness et al can affect the perception of other sonic properties, it's not possible for me to be sure what the absolute differences are if any. Each DAC/amp plays 24/96 tracks with comparable resolution, so it might require an unusual music track or a high-priced headphone to identify further differences. In any case, the Audioengine D1 represents tremendous value for the price.
Questions have come up in several places as to whether a typical computer's USB port can supply enough power to run the Audioengine D1's DAC and headphone amp, to provide good volume especially in the bass where the greatest power demands occur, and to have enough headroom to avoid clipping or otherwise distorting the loudest most dynamic music passages. The answer seems to be yes, since I have many FLAC format music tracks with a 96 khz data rate that have extreme dynamics which distort noticeably when sufficient power is not available. Some of those tracks that I've made 320k MP3 copies of for playing on the iPhone will not play on the iPhone at the full volume I prefer because of the extreme dynamics, however those same MP3's and their parent FLAC's will play without clipping on the computer.
Looking at the Audioengine D1 from the back, there is a set of stereo RCA jacks for analog output (for driving a power amp I assume), an optical input that looks somewhat like the "quonset hut"-shaped USB input on desktop computer gear, and the desktop-size USB input. Looking from the front there's the volume control knob, an LED power indicator and a 3.5 mm headphone jack. There are no data rate LED's on the D1, and the power light does not change in any way when different data rate tracks are played, so it's probably a good idea to make sure the computer's data settings for the D1 are 24 bits and 96 khz when running from the USB port. When operating from optical the D1 supports 192 khz.
The Audioengine D1 is enclosed in a strong dark grey aluminum case which probably won't show scratches to any major extent unless abused. It feels fairly light for a metal box, and photos I've seen of the interior show what looks like a typical small electronic component circuit board, so there's nothing there to beef up the D1's weight. Given the quality of construction and the very nice overall appearance, I'd say they got this one just right. And since the D1 gets its power from the USB, it is ultimately portable. Just remember to keep a small USB cable handy.