They are indeed illegal to use under current UK law.
Whether, they would be able to detect you using one is debatable, however.
From
http://www.theregister.co.uk/2004/10/27/itrip_black/
Bootnote for UK readers Use of the iTrip remains illegal in the UK. To quote Ofcom: "The use of the FM broadcast band to transmit a radio signal from a device used in a vehicle to the car radio is illegal... Such use - despite the relative short range involved - is subject to licensing under Section 1 of the Wireless Telegraphy Act 1949. As the FM broadcast band is allocated for the exclusive use of licensed broadcasters no other systems are permitted to operate within the band. Use of these systems therefore constitutes an offence.
"Transmitting offences under the WT Act 1949 attract a maximum penalty of £5000 and/or imprisonment for a term not exceeding six months." Phew. The joys of living in the free world, eh?