First, be aware or your coverage.  Quite often (esp with AOL radio) the feed will be lost going from tower to tower.  If you are in a weak coverage area, turn off 3G. Edge is more forgiving and tends to have better coverage then 3G.  An exception to this rule is when driving on the freeway.  Since 3G can keep the buffer full better then edge can, you may be able to jump from tower to tower fast enough that the 3G will reconnect and refill the buffer without losing sound.  This depends on your area of course.  If you do not know how to connect to your car radio, or like a few tips to make it better, look at this post.

Second, are you jailbroken?  Then SBSetting’s ‘Processes’ and Pandora Controls (which should install Backgrounder, but this may not be the case anymore) are must haves. 3 apps.  Backgrounder does what you think it will do.  It allows you to run any app in the background.  SMSetting’s Processes allows you to kill a process running in the background.  (See the connection here?)   Pandora Controls supports running Pandora in the background as well as allowing ipod like controls when you double click the home button.  Very cool.  It also supports double click on your headset to advance to the next song.  Very impressive.

So, lets start at the top..

AOL Radio:  First, it will detect your local stations based on your location which is great.  That is how I get my local news. AOL also have a wide range of music and other news available.  Revised.  AOL is out, Tunein is in.  Here is why I dumped AOL Radio
Stitcher:  Just updated last week to include many many more pod casts including BBC.  This is not a true radio as AOL Radio is, but pretty close since each pod cast will cue up another pod cast.
Pandora:  Just great.  What more can I say that has not already been said? For those of you that do not know, Pandora will learn what you like based on feedback you provide. Since Pandora is a desktop app as well, I tend to do most of my profile training on the desktop.  It takes a bit a time to get it trained well, but worth it.
Last.fm:  This is a bit like Pandora, but instead of matching based on music qualities, it matches based on the songs your friends listen to or the Last.fm population in general.  More on this in a bit.

For those of you who would like to start using your iPhone as a radio, make sure it has power (more on car iPhone power). Since I use it in the car, I had to use a power adapter which has it own issues of creating engine noise.  More on that here.

For those who have not used either Pandora nor Last.fm, here is an excerpt from a pretty good write up by Steve Krause:

Nature versus Nurture
Algorithmically, Pandora versus Last.fm is something like the nature versus nurture debate. Taking the nature side, Pandora’s recommendations are based on the inherent qualities of the music. Give Pandora an artist or song, and it will find similar music in terms of melody, harmony, lyrics, orchestration, vocal character and so on. Pandora likes to call these musical attributes “genes” and its database of songs, classified against hundreds of such attributes, the “Music Genome Project.”

On the nurture side (as in, it’s all about the people around you), Last.fm is a social recommender. It knows little about songs’ inherent qualities. It just assumes that if you and a group of other people enjoy many of the same artists, you will probably enjoy other artists popular with that group.

Read the full article here..