This article is from the Car Audio FAQ, by Ian D. Bjorhovde (firstname.lastname@example.org) with numerous contributions by others.
A line driver is a device that amplifies a signal, such as the low-level
signal output from a head unit. Line drivers are made to amplify the
line level signal to as much as 10 volts or higher. This, of course, is
useless unless the receiving end can handle 10 volts as input. To solve
this problem, there are line receivers which bring the line level
voltage down from 10 volts or more to about 1 volt. Usually, the line
driver and receiver are placed as close to the sending signal source and
destination as possible, to minimize noise pick up.
The automobile is an inherently noisy electrical environment. So RCA
cables may pick up noise as it makes its way to the amplifier. Note
that noise here refers to the induced noise, not ground loop noise such
as engine whine. A simple way to fight against this noise is to make
the signal level carried in the RCA cable very high, thus increasing the
signal's resistance to induced noise and resulting in a higher signal to
noise ratio at the destination of the RCA cable. Most head units
produce a fairly low output voltage (< 1.5 V), although recently high
end head units advertise 4 volt or higher output, and won't usually need
a line driver.
The line driver will increase dynamic range in certain cases where
excessive noise is masking the lower level signals. However, a line
driver will not increase the dynamic range when used in a system with
little noise to begin with.
There is some truth to the claim that a line driver will let you play
your stereo louder since there are cases where the amplifier still
doesn't play at its full potential even when its gain is turned all the
way up and the volume on the head unit is maxed out. Adding a line
driver here will allow you to turn down the gain on the amp while using
a lower volume setting on the head unit.
But before you jump in with both feet, remember that all electronics
has their own inherent noise. Thus if you don't have a serious case of
induced noise, a line driver will do little good since it might add
enough noise to offset what little noise it "takes away."
The line driver is a patch to the noise problem rather than a fix so it
is still not the ultimate solution. My personal experience has shown
to ME that a properly installed system with none-malfunctioning
components will have little noise, even if you use low grade components
such as those made by the less desirable manufactures. Also, a lot of
crossovers and EQ units have rather high low-level output signals.
Some times as high as 8 volts. So be sure to take this into