If you have nav, this
1) The button in between the seats in the drop down console is the "Bluetooth" button. Hold this for 3 secs
2) Turn the ignition key to position 1
3) At this point the NAV screen displayed the elusive "PAIRING MODE" message
4) Go to your phone, you should see BMW#### show up as an additional device (mines initially said headset then changed to BMW#####)
5) Pair device from the bluetooth settings on phone, you'll be asked for the Bluetooth Key that was provided with the car.
6) NAV screen will display "PAIRING...." followed by "PAIRING COMPLETE"
If this doesn't work, delete all existing the pairings first, this often helps.
If you have an iPhone 4S, you won't get the caller ID on incoming calls. SMS reading won't work either.