With (good) in ear phones, you're blocking out a significant amount of external noise from the start, due to the isolation properties of the seal you form between the phones and your ears. This allows you to drive your music at lower volumes. It's not like having 100 decibels outside and turning the music to 120 decibels to overcome it; it's more like cutting the outside 100 decibels to 70, and then listening at 90. That said, it's a good idea to set a volume limit beforehand (you can do that on the iPod, and likely on other players too) to ensure you aren't just turning the music up louder and louder. Testing the volume in a quiet room is a good way to make sure what you're hearing out on the bike won't slowly damage your ears.

As a sidenote, in ear phones (or canalphones, or IEMs) are an entirely different thing from earbuds (ie, the things that come with iPods). Most people refer to the former when they're really talking about the latter.