The PWM on timer2 is just a digital to analog converter.
Writing 255 to it gives 5volt on the output pin and 128 gives 2.5volt and so on.
The phaseaccumulator is the oscillator.
If you add 0x100 as the increment and write the MSB to the DAC you have a sawwave out at 61Hz.
Adding 0x80 your phacc the output will be 30.5Hz and 0x200 gives 120Hz.
A variable increment with a resolution of 8bits.
If you want other waveforms the MSB of the phacc is used as a pointer to a wavetable of any waveform.
You can read the concept of DDS here:
http://www.electricdruid.net/index.php?page=info.dds