You need an audio cable if you wish to play audio CDs on the computer. I'm not sure whether they are required for DVDs or not as I don't both watching dvds on my system.
If you look at the rear of the optical drive, just to the left of the IDE connector, you will see another small 4 pin connector (some drives have 2 different connectors for compatibility with older style cables)
There will also be 3/4 matching connection points on the sound card (or on mobo if sound is integrated), marked aux, CD etc.
There cable your friend mentioned goes between the CD drive & sound card (connect to the socket marked 'CD' on s/c)