From MP3Car.com Wiki
Music files are stored on your hard drive in various formats (mp3, wav, mp4, FLAC, wma, etc...)
The files are played externally by a media player such as Nullsoft Winamp (which has a remote control API) and the computer's sound output is connected to the Car's audio system so that the sound comes out the car's speakers.
The frontend sends commands to winamp's (or other) remote control API, which controls the music playback. Music playlists are also used, which contain
collections of sorted music (i.e.: artist, album, genre, etc...) Playlists are generally in m3u format.