I'm not sure but I think this is just a preset for options that are already in the DLNA settings, and it probably converts the file to PCM 24-bit and a high sample rate before sending. If your files are lossless in the first place then this shouldn't really make any difference and to hear the file exactly as it should be you should actually do no conversion at all, but I think there are some who feel that upconversion makes things sound better. "Better" is subjective, what I think you probably mean is that for some reason it sounds different and you prefer that difference and maybe your DAC and amplifier work better with such a signal er perhaps it's their "native" format and don't have to do much work (I don't how they work...), but it's not necessarily reproducing the original file accurately and faithfully.
You might learn a bit more about what it's doing by playing around manually with the DLNA settings, file format, bit-level, sampling etc and see what combination works better for you - as I said, the option you have selected I think is just a preset.