The diagram above show a USB audio interface. Audio components/instruments are connected to the USB interface which then connects to the computer via the USB port for recording. The interface may also have a line output which can be connected to a stereo system. If not, the computer's line out can be connected to the stereo system or to a set of amplified speakers instead.
Note: Many Computer Audio Interfaces do not have preamps or inputs for phonos (turntables) or live instruments/mics. Of course you can still record from tape decks, cd players and tuners (radio). Be sure to read the product's information and specifications.