So, what is it, and where is it needed?
An audio component is a collection of interrelated circuits that come together to perform a global function in the audio chain. A Network Player / Streamer like the A Cappella III serves to take an audio track from the network and convert it into I2S, or AES/EBU or some other digital format to be converted to analog by a DAC.
These interrelated circuits typically need to share or pass signals around. They all typically require power. Ignoring the principal of isolation, one could simply create a power supply with a positive and a common terminal, use this supply to feed all interrelated circuits, and reference the common of the supply for each signal.
But how would it sound?
That depends.
Some systems of circuits do just fine when run on a shared power supply, or a shared transformer. Others tend to choke on the noise from the other circuits, and the end result is not nearly as pleasing as building it right. A simple example: we never power an analog and a digital circuit from the same power supply. A more complex one: each output board on the A Cappella series player has local LDOs so that a shared power supply is still regulated at the point where that power is used.
But it’s not just power that requires isolation. USB is a notoriously dirty signal. (If not for the "U" meaning Universal, we would never have seen an audio company use this protocol) As a result, you don’t want the inner workings of a DAC to be coupled with the electronically noisy inside of a computer through a USB connection. Very few DACs remedy this by providing galvanic isolation of the USB input. Musica Pristina remedies this by providing a galvanically isolated USB output.
Similarly, on our clock boards, we don’t want the clean clocked data side to be in contact with the “dirty” (dirty by comparison) signal generation side, so we use galvanic isolation here.
As with all things, there’s a trade-off. Additional power supplies mean additional heat and additional cost. Adding isolation means possible latency and/or timing issues and additional cost.
Ears to the rescue.
So, while measurements and data sheets can be helpful, it’s ultimately our ears that decide the isolation strategy for each interrelated circuit in our components.