At a
guess below is I assume how this has been done
Wired FM modulators, which usually come as small boxes with a few cords running out from them, intercept the connection between the car's antenna and radio, allowing you to inject your iPod's signal directly into this wired pathway. The result is dramatically improved sound quality—although the final result is still hampered by the limitations of FM radio, which is far from audiophile-friendly.
These modulators are inexpensive (they can be found online for as little as $15) and relatively easy to put in, as long as you are comfortable fiddling with your car stereo's wires. To install one, position yourself underneath the dash. Reach up and unplug the antenna from the back of the stereo and plug it into the modulator's antenna input. Take the modulator's output cord and connect it to the stereo's antenna input. You can then set the modulator to run at any FM frequency. Pick one with weak competing signals (usually at the very top or bottom of the spectrum).
I am sure others would be able to confirm (or not) this is how it was done, other than that once I have time I will remove the stereo and have a look