I am currently using a Vais Technology SoundLinQ 2 in my Lexus 400h. Instead of plugging into a cigarette lighter, using the tape or CD deck or using any form of FM transmission (which I have never heard working perfectly), the VAIS unit avoids all of that by hard wiring a connection between the head unit and the iPod or iPhone.
In my case the unit I bought was specific for the model of my car and the Lexus navigation system. It allows me to listen to playlists and switch tracks from buttons on the steering wheel, while descriptive text appears on the radio. It doesn't handle Bluetooth, since Bluetooth and phone pairing were already built into the Navigation system. It also allows me to hook up video to the Navigation screen, but I found no use for that. The result is that you are left with no messy wires or connections, just plug in the iPod or iPhone and it works quite elegantly.
Vaistech mostly handles foreign cars, but a company named Peripheral Electronics makes versions for most domestic cars as well. Crutchfield has published a iPod Car Stereo Adapter Shopping Guide which can provide a bit of help, but it was written in 2004, so it's of limited value.
Using these, the your Apple device is no longer a foreigner to your sound system, but an integral part, giving you all the functionality that should have been there in the first place when you bought the car.
You should note that these devices are pricey. Depending on what you need they can cost anywhere from about $125 to over $400, but I see it as a one-time charge that will amortize its price well over time. It's also, by some measures, a bargain. I found out, when I bought my car, that Lexus would add iPod functionality with less utility for $1500! When I told them the information I had found on a cheaper solution, the salesman's eyes lit up and everyone wanted the URL.
Installation of these devices is not too challenging. My friend who knows car stereos reports that on a scale from one to ten, installation is a 5 if you know nothing about cars and a 2 if you do. Yes it's a bit of a pain out front, but once it's done, it's done.
The sound quality you get from a direct wire is hands down the best you can get from your device and your audio system, which is a wonderful thing compared to the FM transmitter solution (dicey at best depending upon your location).
But there is a problem: New iPhones will not charge their batteries when plugged in. This is something my iPod Classic 80 GB did with no trouble at all. Apple changed the electric specifications from 12VDC in previous models to 5VDC in current models including the iPhone 3GS. Not good.
But there is a solution, tipped to us by Earl Newton. Peripheral makes a simple four foot cable that changes voltage from 12VDC to 5VDC allowing charging of new devices and bringing back the functionality that was removed by Apple. The cord looks like a 30-pin dock extension with a male on one end and a female on the other. Add it to the existing iPod dock connector, hide the new wiring and along with having an integrated iPod or iPhone, you can charge anything. Right up until Apple changes the specifications again.
If you would like the best possible sound and the most integrated functionality with your existing car sound system, this is the only way to go. If you have the cash.
If you have even more cash, you can get your head unit replaced. But if you have a really good head, or one with a navigation system and want to replace it with something in kind, you will need far deeper pockets that any solution mentioned here.
Have you tried anything like this, or have you found a better solution? Tell us about it.