I was thinking that too John. When I went searching for some info on roughly what year digital volume controls became more popular than analogue (prone to crackles,)I found this interesting statement in a short article discussing the pros and cons of both.
"A digital volume control has its own problems. Each 6dB reduction in volume from the maximum setting throws away one bit of resolution. A low volume setting (say, 30dB of attenuation) is equivalent to discarding five bits. If you had true 20-bit resolution in your D/A converter, you'd be listening to 15-bit audio instead of 20-bit. The lower the volume setting, the greater the loss in resolution.
Anyone with better knowledge care to comment if this is still current and how relevant it is? Here is the link for reference purposes. Volume Controls
That article misses the most common type of volume control in use these days. It isn't digital, but a digitally controlled, stepped resistance, integrated circuit. Basically the line-level signal is fed through an IC. Another set of pins on the chip select how much attenuation is applied, and a lower amplitude analog signal is passed to the output pins. Not as "pure" as a true potentiometer, but no crackles, and no loss of dynamic range.
That said, it's possible to design a very high quality digital volume control which behaves more like an analog control rather just bit shifting. Windows Vista/7 actually has one implemented as its main level control.