Like others have stated, a couple years ago it was hit and miss. But now, it is pretty much spot on every time.
Just the other day I had passengers in the car who were talking loudly, and I used it to navigate. The folks continued talking as I voiced my command, so I thought it wouldn't get the command with the multiple conversations going on. Nope - It worked perfectly. I'm not sure how it figured out the command vs. the other conversations, but it worked. I would say it definitely has improved 10x over since it debuted.
Another thing - when searching for songs, it will always spell the artist or song name perfectly, even if the artist name or song name is obscure, or spelled in a weird way. So it must be using some fancy processing to convert phonetic sounds to the real artist names prior to showing the command on the screen. That's cool.
I still don't trust it for making cell calls. I don't want to accidentally call some random person in my immense contact list at 7am on a Saturday.