An introduction to computer audio
DSD over PCM is an open standard to transmit DSD to a DAC using the PCM format.
Normally you need a dedicated player for DSD. Your PC won't play it without converting it to PCM first. A couple of guys formulated an open standard allowing direct playback on a PC. Not only your hardware (DAC) must support it but your media player as well. At the moment JRiver Media Center in combination with Playback Design DAC works.
As XMOS supports this standard and their USB receiver is used in many async USB DACs, probably more DACs will support this standard in the near future.
The bit rate of DSD (2.8224Mbits/sec) looks impressive but it is less than a 24 / 176 PCM. The trick is to pack the DSD in a PCM stream and put a marker in this stream allowing the DAC to discriminate between PCM and DSD.
DACs supporting DSD over USB can be found here.