Analog gain is applied electrically by an amplifer circuit before the signal is converted into 1s and 0s by a ADC. Digital gain is just multiplication basically of the digitized value. This means you loose resolution. For example a digital gain of 2x (~3db) means all the values coming in are doubled, so certain values (the odd numbers in this case) are no longer possible, which means instead of capturing a 16 bit audio value, you're really only capturing a 15bit one.