The Digital inputs switch in Sources enables the Premium Digital Input feature. It lets you play audio from an external USB device with an audio input through Volumio.
For example, with a USB audio interface with a phono input, you can connect a turntable, select it as a source and send it to your DAC through Volumio.
Without a USB input device connected, the switch has no effect. You can turn it off if you don't need this feature.