Being able to drive a car while you carry on a conversation with a friend in the passenger seat is explained by:

(a) the ability to automatize the conversation and dedicate the majority of your attention to driving.
(b) the cocktail party phenomenon, which allows you to attend to the important parts of both tasks.
(c) the ability to automatize driving and dedicate the majority of your attention to the conversation.
(d) this is not actually possible, because your attention is divided between the tasks.

(C) The ability to automatize driving and dedicate the majority of your attention to the conversation.

Explanation:

The Brain is divided into the right hemisphere and the left hemisphere.

In the right hemisphere, ability to carry out certain activities that deals with global spatial arrangement such as Insight, Intuition, 3-D formation, awarness of the environment e.t.c.  

In the left hemisphere, language, writing, reasoning is pertinent as well.

These two hemispheres are connected by corpus callosum. Corpus Callosum is a large fiber that of axons.

The right hemisphere of the brain decodes information presented in the left visual field, and the left hemisphere of the brain decodes information presented in the right visual field.

Now, when driving, the retina works in conjunction with the right hemisphere. When image of an object reaches the retina, the  size of the object  is dependent on distance of object from observer.  As soon as the  brain receives the sensory information from retina and interprets it, you perceive that the objects would be same size in 3D. This process is automatic and instant.

This phenomena made it possible to automatize driving and dedicate the majority of attention to conversation with passengers when driving.

Cocktail party phenomenon is the ability to focus our attention and gaze on one event or a particular task while blocking out background noise in such event or  irrelevant stimuli in the task.