Well, according to ASR - Review and Measurements of Yamaha RX-A1080 AVR"Pure Direct" deactivates so many things at once that it's hard for anyone evaluating it by ear to properly assess exactly why they've heard a change. Sure you'll find lots of people who insist otherwise and make claims like "Boy their digital DAC and ADC chips sure have rotten sound because I can hear an improvement when they are bypassed.", but what they fail to understand is that even with every single circuit turned "off" there is often still a small level change when invoking "Pure Direct" and we know from research that humans often accidentaly misconstrue small level changes as qualitative differences when in truth they aren't.
This is a classic ploy used by unscrupulous audio gear retailers: they ever so slightly increase the volume of the device they want to push (say by a tiny fraction of a dB) when in truth it doesn't sound different at all. They then sit the customer down in the listening chair and hand them an A/B comparator button to listen to the two devices and the consumer, being a human being, will inevitably claim they hear a difference in the sound even though in truth it is just a change in level. It is an uncanny illusion and knowledge this illusion exists does not make one immune to it as many will claim.
Another trick they can use is to take advantage that consumers (and even many if not most professional audio magazine reviewers) don't realize that not all DACs, optical disc players, etc. spit out the exact same level, even when the rudimentary spec sheet claims the exact same, say, 2.0 V RMS output level. When you actually measure it you often find it strays from that value sometimes considerably.
Pure Direct enabled or disabled does nothing for the DAC lol.
All it does is lower noise floor for the amp, slightly.