I know at least a handful of other riders, including myself, who ride full headphones. The guy in the hat nailed it. It depends on your experience, your knowledge of the dangers of the route, and your ability to adapt to potentially dangerous situations. Like the Rev, above, most people assume a general danger from the lack of an available sense that simply doesn't exist in practice, if you are aware of the variables. For example, taking a lane or anything that requires you to look over your shoulder *might* be more dangerous (as mobius suggests) with headphones *assuming* that the car in front of you has audible brakes. If the car is a prius for example, you're gonna hit it if it suddenly stops while you check behind you regardless of the presence of headphones. "It's dangerous" isn't a self explanatory answer, anyways. I know plenty of bikers that have had accidents involving cars, and thus far the circumstances have indicated that the sense of hearing was irrelevant. A seasoned biker is not going to stop, slow down, or even swerve if a loud car is approaching them from behind because *many cars are loud and almost all of them are going fast enough to kill you*. "At least I heard it coming" seems to be the best support for advising against dual-headphones thus far.
If you know your route or have a keen sense of how and when to take a lane for safety and otherwise safely and for the purpose of safety integrate yourself into traffic, and you are listening quietly enough to hear horns and sirens, then an experienced rider is probably negligibly worse off with headphones in than without.
Oh and "it's illegal" is similarly devoid of rationale or support. Jaywalking is illegal too and makes biking dangerous, yet people jaywalk, drivers speed, and some of us listen to music when we ride.
So can I ask any commenters what the *specific* dangers of riding with headphones are that aren't attributable to riding in general? So far only Mobius has given credible support, and she still listens to music.
Perhaps the more dangerous element of biking is not recognizing that you, too, are a part of the flow of traffic, and that you need to be aware of how and why the cars around you are behaving.