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Proven reasons why in-car DAB sounds miles better than FM
Multipathing
Because car aerials must be omni directional, even the best FM car tuners have real trouble coping with multipathing, which occurs when the received direct signal is degraded by a signal reflected from a nearby obstacle such as a building or hill.
The result of multipathing on-the-move is an annoying frequent background ‘phut’ noise, often known as ‘the pipe smoker in the back’, because it sounds like repeated match striking.
DAB tuners are entirely free from this problem (and can actually benefit from multipathing by combining the direct and reflected signals to improve reception) so irritating noises due to multipathing are eliminated.
Stereo Separation
The weaker the FM signal, the greater the background hiss. Stereo FM is much more prone to hiss (by a factor of 30-40 dB or 1000 to 10,000 times) than Mono FM. In an attempt to overcome this, most modern FM car radios have an automatic device that gradually blends the stereo signal to mono when the signal is less than full strength, i.e. most of the time.
This means that on FM, although you may be tuned to a stereo station, you are rarely actually listening to stereo; you are listening to quasi-stereo. In weaker signal areas you are in fact listening to mono.
DAB is free from this problem. If you are tuned to a stereo DAB station, you are listening in stereo.
Frequency Response
Since FM hiss occurs predominately at high frequencies, another method that FM car radio manufacturers often use to ‘overcome’ the problem of stereo hiss is to include a circuit which automatically filters out (top cuts) higher frequencies. Unfortunately, in the attempt to remove unwanted hiss, desirable high frequency sounds are also cut. This reduces clarity, image, muddies the sound quality and further ruins the fun.
Interference from nearby stations.
High-pressure atmospherics and pirate radio stations can and do cause FM reception trouble in the form of very annoying breakthrough. DAB is free from this problem.
Interference from vehicle electronics.
DAB tuners can discriminate between the broadcast signal and undesirable noises radiated by your, and nearby, vehicles, so irritating whines and crackles won't spoil your enjoyment.
Interference reduction circuits.
Because FM is much more prone to engine interference than AM, manufacturers incorporate electronic devices (Philips' I.A.C. was first) to FM tuners which switch out interference spikes. Although it's not always obvious, this further degrades in-car FM sound quality.
Phase shift.
Some people object to the sometimes-odd sound of FM that can result as a consequence of stereo FM being broadcast in a format that is compatible with mono FM receivers.
AF switching mute.
All except very sophistcated FM car radios only incorporate a single FM tuner, so most FM car radios must often briefly mute when checking for a better alternative frequency.
Summary.
Under ideal, stationary conditions, with a top tuner and a high, carefully aligned directional aerial, it's generally agreed that FM sounds better than DAB. But on the road, DAB wins, hands down, all round.
For a scientific assessment of FM vs. DAB, see here | 
