We usually use the term digital music only when contrasting it with analog media where the sound is stored in a physical form, like with magnetic tapes or vinyl records. In the case of cassette tapes, this information is stored magnetically.
Physical Digital Media
One of the most well-known physical sources of digital music is the compact disc. The basic principle of how this works is that a laser reads the surface of a CD which contains pits and lands. The information on the CD changes the reflected power of the laser beam which is measured and decoded as binary data (1 or 0).
Digital Audio Files
Digital audio files are non-physical sources of digital audio that use various encoding formats to store audio information. They are created by converting analog data into digital data. An example of a digital audio file is an MP3 that you can download from the internet and listen to on your computer or mobile device. When we talk about digital music or other digital audio files like audiobooks, we normally refer to this type of digital audio storage. Some other examples of digital audio file formats include AAC, WMA, OGG, WAV, etc. These file formats are readily available for playback in numerous programs like VLC media player but are also supported by a number of free file converter programs that can convert one digital music file format to another. Playback for digital music files is also supported by various hardware products in addition to computers, like TVs, smartphones, etc. Bluetooth devices utilize digital music codecs too, to enable the streaming and playback of various sound file formats.