I do - on my commute. I live in the far suburbs and every morning ride on high speed and high traffic route 2 to Tel Aviv, and then through the city - even more traffic. It's very loud environment, and I do not rely on my hearing to get through it in one piece, but on a mirror - can't imagine riding without it.

I use Sony MDR-EX81SL headphones with my iPod, and they work well for me - stay where I want them and don't cut out all the outside noises completely. I can hear very well ambulance sirens, whistles, shouts of angry drivers/passengers, etc. I can rarely hear WHAT are people shouting, but I always hear when they are.

I don't listen to music on my weekend rides - when in quiet rural setting, I enjoy silence .

If you're new to riding in traffic, I'd recommend doing so without music - roads can be unforgiving, and you don't need a distraction. But when you get used to it, and crave some musical background - don't see why you couldn't try it.

That's my story (and I'm sticking to it ) - obviously YMMV. Good luck.