To summarize a long and complicated story, Bluetooth is a standard 'language' adopted by electronics manufacturers which allows their devices to communicate with one another. Using radio frequencies, Bluetooth allows your MP3 player, cell phone, PDA, laptop and other gadgets to link wirelessly with one another after a 'pairing' procedure.
After pairing two devices, they become friends- and a line of communication is opened between them when their Bluetooth systems are turned on and both are within range of one another. Once set up, devices can transmit and receive data from each other- assuming they're within a fairly limited range of each other. There's no need to physically plug one device into the other for them to communicate.
For instance, a Bluetooth MP3 player and Bluetooth-equipped computer can transfer music files between each other with ease. A Bluetooth camera phone could transfer its photo files to the computer, and vice versa. Possibilities are nearly limitless.
Automakers are now employing Bluetooth technology on many of their new models, making them work harder for drivers who use a Bluetooth equipped phone, MP3 player or PDA. After pairing your particular device with a vehicle, you'll be able to more easily manage phone calls, music files, contacts and more.
A Bluetooth phone system is the most common. After pairing, some systems automatically copy the contact list out of the phone for display on a screen within the vehicle. Phone calls can be made by simply scrolling through the screen and pressing a button, rather than having to handle the phone itself.
Controls are commonly mounted to the steering wheel, while a built in microphone picks up the driver's voice. The voice of the person on the other line is played through the vehicle's stereo system, and voice-commanded dialing is supported.
In effect, as long as your Bluetooth-equipped phone is present somewhere within the vehicle, you'd be able to browse your contact list, dial, and receive calls without ever having to remove your hands from the steering wheel.