Theres actually three ways to do it..
Option #1) If your stereo has an Aux in, with just one jack, then you can run a standard headphone cable to it(so it goes from your ipod headphone hole, to this hole in a single cable).. mine has this and I actually am using my Giro Tuneups Cable.
Option #2) If your stereo doesn't have the single port in, you can run a Y-Cable, it goes from your headphone hole, to the two audio holes in the back of your stereo. heres a pic:
Option #3) There is also an ipod specific cable which runs from the bottom of your ipod in the docking slot, to the 2 ports in the back of your stereo as pictured below.
Option one is the cheapest but requires a port that not all stereos have and offers the worst quality. Option two is the most common option and is relatively cheap with decent quality. Option three offers the best quality audio(since the bottom port is much more powerful then then headphone jack) but is also much more expensive due to the fact that it is Ipod specific so of course they jack up the price...
Hope that helped