There are several ways to connect your iPod to your car's stereo ranging from simple and poor sounding to complex and high fidelity. Sometimes you don't have much of a choice because your car stereo limits your options, but there's an option for every configuration and budget.
The easiest method to blast your iPod through your car stereo is with an FM transmitter. FM transmitters (or modulators) connect to your iPod and turn it into a tiny radio station, broadcasting the audio over the air on an open FM frequency. Simply tune your car stereo to the FM station and you're in business. They're inexpensive and easy to install but finding an open FM frequency in a large city can be difficult and sound quality is poor.
Another method for connecting your iPod is with a cassette adapter, if you have a cassette player in your car, a basic adapter can be purchased for around $20 (new) or half of that on eBay. Sound quality is better than FM, but not stellar, but you can't beat the price.
One of the best ways to connect an iPod to a car stereo system is via an auxiliary input, which sounds great—if you're lucky enough to have one. Many modern head units from Pioneer, Alpine, Kenwood, JVC, Sony and Clarion are equipped with auxiliary inputs. All you have to do is connect your iPod and switch the source to AUX. If you're using the factory stereo that came with your car you probably don't have an AUX input and you'll have to use one of the options above.
If you don't have an auxiliary input but your car stereo controls a separate CD changer you should be able to convert the CD changer to an auxiliary input. The problem is that the interface can be a little spendy (anywhere from $20 to $150) and you lose access to your CD changer.
The best of all worlds is when you can integrate your iPod directly into stereo system, control it from the head unit, see the artist and track information on the head unit and charge your iPod at the same time. Several vendors claim such compatibility but they're not all the same.
BMW, Volvo, Mercedes and Scion currently offer Apple endorsed in-car audio solutions for the iPod. The BMW solution is expensive (around $150 plus $150 installation) and you're limited to five custom playlists. The Volvo iPod adapter works with some of its 2005 U.S. cars allowing you to plug an iPod into the glove compartment and control it through the stereo controls, including the steering wheel buttons.
The Mercedes-Benz iPod solution costs $300 (plus installation) and allows you to play and view any playlist and view the artist and track info on the dashboard. The 2006 Scion xA, xB and tC models will accept an iPod in the center console and give you full control from the Pioneer head unit allowing you to select artists, albums, playlists, or tracks and features a one-line scrolling display.
One of the worst car/iPod solutions is the Pioneer CD-IB100 iPod interface adapter. Only the first eight characters from the iPod (including spaces) are displayed and it doesn't scroll. What's worse is that it forces you to use cryptic function keys to access the iPod controls.
By far the best solution is Alpine's KCA-420i iPod control interface ($99) which allows you to access the iPod with the Alpine receiver controls. The interface works with 2004 or newer Alpine Ai-Net receivers and displays the artist and song information on the display and charges your iPod battery when driving. Pair it up with the Alpine CDA-9855 head unit and you have your choice of satellite radio providers and up to 512 different colors to compliment your dash! Schwing!