Hi wyattearp. 'Analogue' is a term to describe standard Scalextric where each driver controls power going to each lane - on a two-lane track, you can race two cars.
'Digital' is a system where each driver controls power going to their car via a digital signal in the track. The power to the track is 'always-on' and the digital chip in each car controls the amount of power delivered to the car's motor. In Scalextric digital (including ARC Pro), you can race up to six cars at one time. To work on a Scalextric digital system, you can use almost any slot car, but it must be fitted with a Scalextric digital chip.
For Digital Plug Ready (DPR) cars, conversion to digital is easy - a C8515 digital plug (C8516 for Formula One cars) fits into the underside of the car. Only Scalextric and Pioneer produce DPR cars.
Non-DPR Scalextric cars and cars made by almost all other brands require the C7005 Retro Fit Chip. This requires some soldering and a small hole drilled for the lane-changer LED. For non-Scalextric cars, a 'ferrite man' suppressor needs to be fitted between the chip and the motor. For high performance cars (for example Slot.it, NSR, Ninco, Scaleauto, Thunderslot etc), the Slot.it SP15B chip for Scalextric Sport Digital (SSD) is recommended by most enthusiasts. The SP15B also requires soldering and a hole cut for the LED.
To convert an analogue Carrera car to Scalextric digital, you will need to fit a C7005 Retro-fit digital chip and fit a 'ferrite man' (see how to here) between the chip and the motor. Carrera Digital chips are not compatible with Scalextric digital, however, you could remove the Carrera digital chip from a Carrera Digital car and fit the Scalextric C7005 chip and ferrite man. You'll also need to drill a hole for the LED - the two chips fit into the car differently.
Carrera cars require a smaller guide to work on Scalextric track. This red replacement guide is supplied with each Carrera car and is easy to fit. If you are using ARC Pro, the red guide will need to be painted black (with a quality permanent marker) or replaced with the black BRM guide for Carrera (Ref: BRM S -126).
Hope that helps!