How does it work? Where is the head unit?

This works the same way a flip-out does. There is an LCD screen in the dash and an AV Receiver (also known as a "Brain") mounted somewhere else in the car. The Brain has everything you would find in a regular radio and more (AM/FM tuner, amplifier, Audio/Video Inputs, Inputs for Pioneer DVD Player/Changer, Pioneer NAV, TV Tuner, etc.). I have the AVM-P9000R which also has Built-in Dolby Digital (AC-3)/DTS/Dolby Pro Logic Surround Sound Decoders for watching DVDs. Here is a picture of my Brain mounted in the trunk. (click to enlarge)

The LCD is connected to the brain and you can control all the functions of the brain with the Remote.

Does this come with the Brain?

No... the brain must be purchased separately. All you get is the LCD with the custom made faceplate.

Will any head unit work, or does it have to be a Pioneer AV Receiver (brain)?

In order for this set-up to work it must be used in conjunction with a Pioneer Brain. You can choose from the Pioneer AVM-P8000R or the AVM-P9000R. Street value of these is between $400 and $650.

Do I have to sacrifice having a CD player up front to have this option?

Yes, but you can install a DVD Player/Changer (which also play CDs) or a CD Changer in the Glove box.

Will I still be able to use my Steering wheel controls?

The steering wheel controls are only designed to be used with the BMW radio. But since steering wheel controls have become so popular, a company called Pacific Accessory Corporation, (PAC) has decided to make an adapter (PAC SWI-X) that allows you to use them with most aftermarket radios... including the Pioneer Brains.

Does this have inputs for a PS2 or XBOX?

This setup has a few Audio/Video inputs. You can add anything to it that has RCA outputs like a PS2, XBOX, GameCube, VCR, Back-up Camera, etc.

Is this difficult to install?

The LCD is very simple to install. It fits in the dash easily. But you do have to relocate the AC controls to the bottom where it's installed on vehicles with factory NAV. The relocation is easy. All you need is a new center console which costs about $45 from the dealer. The only hard part is installing the Brain. It's not too hard if you're mechanically inclined but if you're not, you might want to save yourself a headache and have it installed professionally. Should cost no more than $100. Here's the installation instructions for the Brain (PDF).

Can I add other LCDs?

Yes! The Brain has extra Video outputs so you can add more LCDs in your headrests, visors, trunk, etc.