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That's the audio (aux) port. It's intended for headphones, but many newer cars have an aux-in jack so that you can feed audio from a portable device to your car's sound system.
What's nice about it is if you do have a sound system with the AUX-in you can listen to your music or you can use your car speakers as the speakerphone. I asked my wife how I sound and she says it sounds good. The iPhone doesn't do that.