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This is the Audio Device Graph Isolation service, a part of Vista and 7's audio services. The real audiodg.exe is harmless, but like any file it could be infected. If it's not doing anything, it should be fine. The worst that can happen by ending it is your audio goes out, restarting your computer would fix that.
Import an audio file in a spectrum analyzing program. Observe the graph. Notice the cut-offs. The position of cut-offs can tell you the bitrate of the file. Cut-off is the line put at where the graph cannot reach higher. For example, an 128 kbps audio graph will be cut-off at 16 kHz.