ipod cable = apple's properitory cable. so you can control the ipod through your head unit
auxiliary 3.5mm = standard headphone jack. you gotta manually tune it on your mp3 device
Basically since ipod is so popular... a lot of stuff syncs with ipods. Basically the ipod cable is from the glove comparment and you just leave your ipod in there. Then you can tune it with your deck.
Auxilary is only receiving sounds. But it can be use for more stuff such as pda phone, laptop.