Let's try to answer sensibly.

As Mnyb says the Touch is a streaming client device. 
It has no direct physical connection to your PC. 
It should be connected to your router either wired (preferred) or
wireless.

The Touch has 3 possible modes of operation.
1. Standalone. This is where it connects solely to mysqueezebox.com (you
need an account) and streams internet radio and streaming services
provided by myqsueezebox.
2. With LMS on a PC/NAS. You install LMS onto a PC which then serves
your music to the Touch. The PC should definitely be wired to your
router.
3. With a cut down LMS via USB. The Touch contains a cut down version of
LMS. If you connect a USB drive containing your music to the Touch's USB
port it will serve the music directly. This mode is however not
preferred due to the limited size of USB drive the Touch will support
and the fact that the onboard LMS is now rather dated.

In terms of connection you have 4 choices
Analogue - the Touch has an onboard DAC
Digital (optical)
Digital (coaxial)
USB DAC - made available by an optional "plugin" called EDO.

The Audiofool comminuity will almost always opt for the USB DAC but if
you already have a DAC, Amp or Revceiver capable of taking either
Digital connection then these work IMHO just as well.

Most people operate their own LMS on a PC in conjunction with the Touch
and other Squeezebox players. LMS versions are available for Windows,
Mac, Linux & various NAS type devices. In addition a Raspbery Pi coupled
witha USB disk full of music can make a good LMS server - see Max2Play
microSD card image which does the job out of the box.

I hope that helps



*Vortexbox LMS 7.8 music on QNAP TS419p via NFS* iThingys/iPeng/Tablets
*Living Room* - SB3 -> Onkyo TS606 - > Celestion Ditton F20s - Zone 2 ->
Sony TA FE 320 -> Sennheiser RS 130 & B&W P7
*Office* - RPi -> Sony TA FE320 -> Celestion F10s / SB3 -> Onkyo CRN 755
-> Wharfedale Modus Cubes
*Dining Room* -> SB Boom *Kitchen* -> UE Radio (upgraded to SB Radio)
*Bedroom (Bedside)* - SB Touch -> Topping TP21 -> AKG Headphones
*Bedroom (TV)* - Amazon Fire TV (SB Player) -> Topping TP20 ->
Wharfedale Modus Cubes
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