Okay, I figured it out. If you still want to believe in magic, read no further
I took a paper clip and ran it all over the car dock and found that it does, in fact, have a small magnet embedded just above the "M" in Motorola. The Droid will sense that magnet and automatically go into car navigation mode.
I knew it had to be magnetic, just wasn't sure how. Now we all know!
It's important, then (as stated in another post), to not use a belt clip that closes magnetically or the phone will keep trying to go into car mode on your hip. The Motorola case designed for the Droid closes with velcro.