Here's BMW's official explanation:
BMW claims the system provides an "extremely accurate impression of current engine load" and that the sound has been optimized to spread across the entire cabin. Not only that, but when Sport or Sport+ is engaged, the sound inside the M5 is enhanced and perfectly sequenced with induction, engine and exhaust noises. We're not sure if we're geeked or disturbed, but it's certainly trick.
The Active Sound Design technology specially developed for the new BMW M5 takes its cues from the driving situation at any one time to deliver an accurate reproduction of the engine's sound through the car's audio system. The system's digital signal processing exchanges data directly with the engine management, allowing it to reflect the engine's revs and torque, and the car's speed over the road. The result over a smoothly driven journey is a discreet soundtrack in keeping with the harmonious and assured characteristics of the V8 powerplant. A stamp on the accelerator, meanwhile, prompts an immediate audible response to match the instantaneous – and typically M – burst of power from beneath the bonnet.