Apparently it is quite common for them not to work , but I was the same as you that I wasn't convinced it was broken & that it was me being stupid.
However instruction for dummies like me is:
You insert the ipod into the holder making sure it locates on to the connector.
The ipod screen will then illuminate (my ipod touch says accessory attached).
Wait a few seconds and then press the cd button on the radio unit and it will come up with track 1 in the centre of the screen. It will then be playing one of the Playlists from the ipod and the buttons around the centre console screen can then be used for other playlists on the ipod.
I hope this is clear. If it doesnt automatically start up, then the connector in the arm rest is knackered!