16-bit PWM using an on-chip timer

What is a DAC?
Digital-to-analogue converter; a device that converts digital pulses to analogue signals (current, voltage or electric charge).

What is pulse width modulation (PWM)?
Pulse Width Modulation (PWM) is a way of digitally encoding analogue signal levels. Through the use of high-resolution counters, the duty cycle of a square wave is modulated to encode a specific analogue signal level. In more general terms, a switch is opened and closed in timed pulses, where the time the switch is closed is determines the power output.
Basically, a PWM variable-power scheme switches the power quickly between fully ON and fully OFF tens or hundreds of kHz in the case of a computer power supply (which has a regulated output). The switching rate is much faster than what would affect the load. The term duty cycle describes the proportion of ON time to the regular interval or period of time. A low duty cycle corresponds to low power because the power is off for most of the time. Duty cycle is expressed in percent, 100% being fully ON.