The audio on the Pandora is as digital as on the Pyra.
The DAC converts it to analog audio which is then routed through the volume wheel and to the speakers / headset.
The only difference here is that the analog audio does NOT get routed through the wheel (which should improve the quality, as there are less components), but the exact same volume wheel as we have on the Pandora provides different values (based on the position) to the DAC which changes the volume.
There are NO volume steps like with digital audio wheels, there is no turn-around-forever like with digital audio wheels.
So there's not really much difference.
Audio on the Pandora is also digital, before it goes into the DAC, or how did you think this works?