It has 4 selectable reference output levels, in 6 dB increments, that are implemented as physical, analog, attenuators. The can be fixed at a given output level, or if you turn on “Auto Ref Level” (chapter 19.3), the unit will automatically switch between them as you turn the volume dial, as necessary. Intermediate volume steps are handled purely in the digital domain, in 0.5 dB increments.
In practice this means one of two things:
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Leave the unit on “Auto-Ref Level = On”, and let the unit worry about the best combination of analog and digital attenuation.
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Pick a fixed Ref Level, and let the unit do all its attenuation in the digital domain.
If you’re feeding non-pro/studio level gear, you’ll be best off starting with a fixed reference level, of -5 dBu (RCA) or +1 dBu (XLR) and seeing how you go, as if you set this too high you’ll overload the inputs on whatever you’re feeding and cause them to clip (which is obvious when it happens as it sounds awful and clearly distorted).
Pro/studio gear will usually tolerate the highest reference level of +13 dBu (RCA)/+ 19 dBu (XLR), depending on exactly what the gear is.
Since I am driving an external headphone amplifiers with mine, I choose a fixed reference level setting that lets me put the digital volume control at 0 dBU, and do the volume control on the headphone amplifier.