I was so confused by the CD drives of that era. They all had a volume wheel and a headphone jack, but never once did I experience those working. The audio CDs were always “owned” by the OS, which piped the audio through the normal channels out my speakers or the PC headphone jack.

I imagine the existence of those means that CD drives had their own DAC and other logic. I guess there was an idea of wanting to play CD audio without it being a PC concern? Or on PCs without audio capability?

Almost all IDE and SCSI CD-ROM drives were indeed capable of playing audio CDs fully autonomously, with the host PC basically only sending them the command to start playing; many drives took it one step further and provided a play button in addition to the usual eject button, which worked even if the drive wasn't plugged at all into a machine. The audio was typically output both to the front panel headphone jack and to a 4-pin connector on the back of the drive, which you were supposed to connect to one of your sound card's aux inputs so that it would get mixed into the system audio output.

Unfortunately, a decent number of machines were not fitted with the relevant cable. Combined with the low-quality DACs that most drives used, the compatibility issues that plagued ATAPI implementations and the dramatic increase in CPU power and sound card quality throughout the mid-to-late 90s, this led media player software to quickly move on from drive based playback to so-called "digital audio extraction", where the CD is basically ripped in real time and streamed to your sound card's own DAC. Thus, unless you played older games that relied on hardware CD-DA playback [1], it's somewhat unlikely you ever experienced it under, say, Windows 98 or XP.

[1] As offloading playback to the drive had no CPU overhead, games often stored their music as additional tracks on the game disc and played it that way. Incidentally, basically all CD-ROM-based game consoles and arcade systems relied heavily on hardware accelerated playback as well, with some going even further and allowing for compressed (ADPCM) CD audio streaming with no CPU intervention.

They absolutely had a DAC. The earlier commercial CD-ROM drives used an internal audio cable connected to a dedicated input on the sound card pcb for cd-audio. It was years before audio players used digital audio streams.

Did you ever try using the drive with the computer switched off?

I remember my father powering one of these old cd ROM drives, without a computer and using it to play music CDs using these jack connecter