I have a new LG TV with an Audio Optical Out. I bought a converter - Optical/RCA, to connect my DVD/surround sound. This is my connection so far
LG with Optical Audio Out -->converter (optical in)
LG HDMI ---> Roku HDMI
Roku --> out to Audio In on surround sound/DVD (aux)
Optical converter ---> out to Audio In on surround sound/DVD (R/L red/white)
I am left with a yellow coax in on the converter and no idea where to connect it. Sound from TV is distorted (to say the least). I do have sound now through surround sound with DVD, Roku and USB. So I made some progress!
The converter you purchased is a Digital to Analog audio converter. It accepts either an optical or coaxial (your yellow RCA input) digital input. Since you're digital audio source is optical, there is no reason to connect the coaxial digital input.