It says "digital I/O" because it's a digital Input/Output jack.
I would imagine the typical scenario would be useful in using digital Input on the SBM-1:
CD player or home DAT deck > optical or S/PDIF coax to 7-pin cable > SBM-1 > portable DAT (D7, D8, D100, M1).
That way, you can get a digital signal going from one device > SBM-1 > onto a portable DAT recorder.