If you have a drive that supports it, DAO 96 allows you to burn the 8 subchannels of data ("P" through "W") that are part of the CD standard. This allows you to burn some of the more esoteric formats such as CD+G and CD Text. The "96" stands for the 96 bytes of subchannel data included in each CD sector. There isn't any point in using this mode unless you are trying to burn one of the formats that require access to the subchannel data.
DAO 96 is often associated with raw mode burning. With raw mode burning you can control all 2352 bytes per sector that will be written to the CD, not just the 2048 user data bytes. This allows you to override the error correction coding and headers in the sector. Again, not all drives support this, and it is neither necessary nor desirable unless you are trying to do something like defeat copy protection. And if that is what you are trying to do, then Nero isn't your choice for burning software. Go get BlindWrite, CloneCD, Alcohol 120%, etc.