I have had people tell me before that compressed music has sounded better to them than uncompressed music. Especially when playing through an inferior system. Since the sound system can't really play the dynamic range in uncompressed music well, the compression that actually has much less dynamic range sounds "better". There is lost resolution for sure, but at least now the system is playing certain sounds whereas before the amps and speakers that are unable to handle it just distorted.
Also, people have a tendency to mistake louder for better. If you setup any blind test and play the same thing only a couple of dB higher the second time, 9 of ten people will attest that the sound was better, clearer, deeper, etc. When all it was, was slightly louder.
One or both of these phenomena may be going on here. I don't know any other explanations. The Grom is using the same wiring and lines going into the radio. The only other factor is the DAC's. Iphone/iPad/ipods for the most part use a wolfson DAC, I don't think it is a lot better than the CD player's DAC's.
I still don't know how a Grom would make anything better.