Currently the 3.5mm jack uses the DAC built into the iphone. With the lightning port a digital signal is sent direct the the DAC built into the headphone. This will allow a higher quality signal sent direct to a higher quality DAC.
I have one thing to say to that ... point of diminishing returns. It does not mean a hill of beans because any alleged improvement in signal transmission will be unnoticeable to the user, even if you are Jay Z.