The "Digital Downloads" feature gives merchants the opportunity to sell digital products. Merchants can upload and maintain all digital products directly from the merchant portal.
When you use the Digital Downloads feature, you must agree to a second set of Terms and Conditions. They are under Settings -> Digital Products Settings.
Once doing so, you can define the conditions for your merchants' use of the Digital Downloads feature. If you have questions about those settings, visit Edit My Digital Download Settings.
There are also email settings to customize what the customer sees when they have purchased a digital product. The merchant will receive the standard "Product Sold" email, but the customer will receive the new "Digital Product" email. Be sure to add the correct merge fields, but you can also use some of the HTML tools to customize the message as well. This can be found under Settings -> Email Settings -> Digital Product Email -> Edit.
There is also an orders section specific to Digital Orders, similar to the standard unfulfilled orders section. All the relevant order information is there. However, this one contains a resend link which will resend the digital product email to the customer if needed. It is under Orders -> Digital Orders.
On the "Products" screen, there is a column to identify which products contain digital variants, and the ability to view the different product pages (product info and attachments pages).