Yup. I have one in the BMW and love it.
The idea is simple. Your CD player can recognize a number of different formats (such as MP3). 1's and 0's are 1's and 0's. So what does it matter if your deck reads them from a CD or a flash drive?
I have a Kenwood Excelon CD deck, I forget the specific model number (KD7 X790, I think). Bought it through Crutchfield.com. It is otherwise a nice CD deck with the capability to read MP3. I went with this specific model because it was the only one in the line with a USB port. The port comes out the back of the deck, and I routed the cable to come out of the slot the OBDII port hides behind.
I have it hooked up to a 2gig flash drive. I can swap music on and off. The software that came with the deck also allows me to organize the music into playlists, artist, album, genre, etc. So I can put my favorite songs on, and shift what's playing based on my mood. When I get a new CD I want to listen to, I slap that in the bay. Also, the software has a voice function, so it will read off the name of the band (or whatever category I've chosen) as I flip through them.