Hi there, (This is Beckie's son)
As a former car audio installer I can say that the direct connection is the way to go, I would NOT recommend RF modulation as someone has mentioned as an option. This is when you plug the iPod/iPhone into a unit which transmits a weak signal radio station; you will not be happy with the quality of this.
The way to go is to get an aftermarket head unit that will allow you to plug in your iPod in and have it charge while it feeds the sound to the radio. Some factory radios support CD changers, most of these have aftermarket modules that will allow for iPod connectivity. These modules typically range in price from about $100 to $180 from your local car stereo shop. If you're somewhat technically and mechanically inclined you can save yourself a nice chunk of change by purchasing the module online and installing it yourself.
Without more information about the setup you currently have and what exactly you're looking for I can't make any suggestions for you. You do need to be sure that whatever you go for does support the USB charging voltage of 5v as opposed to the old charging method of the iPods which was 12v Firewire. There are adapters to get around this, but they're about $20 on top of whatever adapter you have to get the iPod/iPhone connected to the car in the first place. (Scosche makes this unit and they're typically known for making really quality products).
Now for ONE more option, you can do the headphone jack option as input but your sound quality isn't going to be as high and you're going to drain your battery unless you have a car charger. Most if not all of the units that plug into the bottom of the iPod/iPhone charge it while controlling it as well (this means you control the music selection from the radio, not from the phone).
Hope you enjoyed the bombardment of information :-)