Imagine your signal comes in degraded. Some extra noise on the wire because it is passing next to a faulty wire in your walls or something. You can then do a FFT (example) and pull out the noise and rebalance the signal. Maybe an easy way to think of this is with radio since you're very used to dealing with static in that domain but fundamentally there's nothing different than signal coming through a wire other than the technicalities of the medium through which it's transmitted.

There's much more signal processing you can do besides FFT btw and many can improve signal quality and thus sound quality. Even something like a built in equalizer. Sure, you can do this all with hardware by creating all the right filters but you can do more in a smaller package with a computer