Simply put, an FM transmitter sends your music signal over the airwaves, while an FM modulator injects your music signal directly into your car radio. They both work by sending FM frequencies similar to radio broadcasts, which is then picked up by your car stereo antenna. FM Transmitters transmit the frequencies wirelessly and FM Modulators transmit the frequencies via a hard wired connection into the aerial.
The Australian Radio Frequency Spectrum is congested. In a perfect world, one would simply find a clear channel space in the area, keep tuned to that frequency, and voila! beautiful music from your MP3 player. But this is not the case. Since an FM transmitter transmits over the air usually with very low power, its quality is severely reduced by many large radio stations, not to mention even the smaller radio stations. FM transmitters are also prone to interference depending on weather conditions, topology, and landscape. You may start off with a good connection in one area, only to find it extremely distorted in the next suburb over.
An FM modulator, however, is a direct in line connection to your car stereo. The car aerial is disconnected, then the FM modulator connected direct to the Antenna Port, and then the car aerial reconnected again, but this time through the FM modulator. It is a beautiful solution. It provides very high quality sound as you would expect from a commercial radio station. And since it connects via the Antenna Port, an FM modulator will suit any car – therefore it is a Universal Car Kit!
So if you had a choice between an FM modulator and an FM transmitter, consider the options! You may find for a little extra cost you have a stable, quality connection for in-car music needs.