I have a CPO 2013 S60, purchased in March, 2015. My iPhone 6 (BlueTooth connected) and iPod (connect via USB) have worked perfectly, until yesterday.

When I started the car, it went through the normal process of connecting the iPhone. However, once the iPhone connected there was a prompt on the car's display:
"Incoming call
Unknown
Answer with OK
Close with EXIT"

I closed with EXIT.
I noticed that the Radio, though On, had no sound. Pressing the Up Volume button on the steering wheel showed the volume display, however it showed:
"Volume for Phone Ringer"
I changed to Media, and got the same results, no sound, and the same prompt when I attempted to increase the volume.

So the system was acting like I was on a phone call and had muted the Radio and iPod.

Pressing the Exit button while in the Phone mode did nothing. Also, pressing the Talk button did nothing.

I tried:
Disconnecting the iPhone and reconnecting and got the same results.
Deleted the iPhone from the car's system and Deleted My Volvo Car from my iPhone and then Paired the iPhone to the car.
Got the same prompt about Incoming Unknown call, and again no sound from Radio/iPod.

When I returned home I shut the car down, restarted, re-Paired the iPhone. Did this about 3 Xs with the same results.

The last time I tried making a phone call from the iPhone (not using the car's system, but entering the phone number on the iPhone).
The phone call, to my landline went through, and since then, everything is working as it should.

Anyone had this problem?

The problem seems to be iPhone related. When it connected, the car thought a call was coming in, and did what it was suppose to do, mute the Radio/Media.
One thing that I didn't try, was to reboot the iPhone.

 

I have a 2013 S60 and mine is connected the same way. Never had an issue with incoming calls. One thing to try is take the iPod out of the mix and put all of your tunes on the iPhone. I only recently connected both units to the system because I found an old iPod that had some older tunes on it.