This article is from the Car Audio FAQ, by Ian D. Bjorhovde (email@example.com) with numerous contributions by others.
In a few short years several products have hit the mainstream which
enable consumers to use digital music files instead of relying on fixed
media like tapes and CDs. The most popular format is MPEG Layer 3 or
simply MP3. Most aftermarket manufacturers produce at least one
product which will allow you to play MP3 files that have been copied to
a CD-R or CD-R/W, and to do so without converting the MP3 files into CD
Audio format. Some of these units will also play other formats, such
as WMA (Window Media Audio), or Ogg Vorbis.
Another option which is often less expensive is to use a portable music
player such as Apple's iPod or the Creative Nomad, and to use an
inexpensive FM modulator to broadcast the player's audio output over FM
radio. Then, you simply tune your headunit to the proper FM station to
listen to your music. The downside of this is that your overal sound
quality is limited not by the encoding of the file, but by the
capability of FM radio, which is significantly less than audiophile