I got my new Chromecast audio gadget about a a week ago, and was excited to give it a try. It has one input and just one output, which at first got me confused as a read that it had optical audio out.
What I realized is that the 3.5 mm audio output is also used for optical connectivity. You can either use a 3.5 mm stereo cable (included) or an S/PDIF optical cable. If you are going optical, make sure you opt for the S/PDIF Digital Optical Audio Cable, Toslink to Mini Toslink, instead of the regular Toslink connector.
Using Spotify to cast to this dongle is fast and accurate. And the audio quality is superb. Google said that with multiple of these connected in the house one could be able to synchronize them. Just likes Sonos, but with a fraction of the cost. I hope to see similar functionality with the original Chromecast, as I have several already in service.
Chromecast Audio with Optical and Analog audio out