My car has a simple line-in audio auxillary jack that I can plug my iphone into. The Pandora iphone app is designed to stream over Wifi, 3G or Edge, and audio quality is adjusted based on the quality of your data connection. I tested Pandora both in the city with a good 3G connection and also on a road trip where only Edge was available.
3G streaming had great quality and zero interruptions during my test. I found it to be a perfectly functioning music option for city driving. Think of it as a free alternative to satellite radio.
With Edge, I found the quality to be noticeable lower, however, it was still adequate. During my 2 hour drive through the country, the phone stopped for bufferring about 3 or 4 times. Most of the skips came early on when I first started the app. Once it got going, I had at least an hour of uniterrupted music.
I found Pandora to be a nice option for road trips when you grow tired of your own collection or just want to hear some new music. I could do without the skips, but overall it was not enough of an annoyance to prevent me from using the app on the road when I am restricted to an Edge connection.