The cradle in the armrest is for a bluetooth 'puck'. That allows bluetooth connection to use your iphone with the car. You can make and receive calls, have the call sound route through the speakers, etc. I don't have an iphone so can't say for sure how well it does transferring your contacts, etc. but there are people who can. There are some threads on bluetooth streaming through them, some have had success, others like me haven't.
The aux port is for audio streaming. At the time iphones weren't considered, just ipods. It allows you to connect your Apple product and control and play it through the speakers. There are some limitations. It has no capability for the phone.