The dock connector is recommended because the dock outputs a line level signal. The headphone jack does not. The headphone jack into a line level input poses two problems - improper signal level and impedance mismatch. The latter helps introduce ground loops, which is why it's better to use the dock connector. The dock connector ensures that a line level output goes to a line level input, and you will not have any ground loops.Audio wise, you probably won't notice a difference unless you set the volume on the iPod really high. If you do, you'll notice clipping of the audio signal (distortion) and you could probably damage the adapter and/or headunit over time. But it sounds the same.
