basically there is two options as stated, on uses an audio bus lead (cd changer lead) to carry data such as the song name and all that polava and you get the phono leads to carry the sound. the other option only has phono leads, although if it is going into and oem stereo i think they sometimes have an iso adaptor or block of some type.
in all honesty, if you are not too fussed about hitting "skip" all the time then the second option and cheaper option is the one to go for, but if you want the full ipod control then you will be better off with the first option as you get the gadgets that enable you to have the facility to go go through your playlist on the headunit
hope this clears up any misconceptions
Adam