Think of it this way: the DAC inside your CD player's only job is to CONVERT the digital signal being read off the CD to an analog signal. Typically, you'd then send that ANALOG signal out to either speakers or a receiver using standard red+white RCA cables right? Makes sense.
BUT -- if you're sending a DIGITAL signal out of your CD player (like, say, by using the TOSLINK output), then you're bypassing the internal DAC in your CD player altogether, and instead are directing that digital signal from the CD to an external DAC (in this case, inside your speakers, I suppose).
So as you can see, you're not actually "connecting" one DAC to another, as your CD player is simply routing the digital signal to a different DAC that just happens to live outside of its case rather than inside it.
We call this using your CD player as a "transport", and it's incredibly common.
Lots of people use their CD players to read the digital information off the disc, but prefer the sound of an external DAC to the internal one, and thus connect their CD player via a digital connection to that external DAC instead.