The iPhone 5 will connect without problem via Bluetooth giving you full phone call capabilities along with text and email notification and reading.
If connected via the lightning/USB cable to the USB port in the armrest you get full iPod integration, charging and phone call etc are now done via USB rather than Bluetooth.
The iPod capabilities will give you artwork, playlists and most of the functionality of the iPhone/iTunes app.
2013 650i Gran Coupe xDrive M-Sport
2011 BMW S1000RR
2012 535i xDrive M-Sport
2007 X5 4.8 is
2008 550i M-Sport
2007 530i M-Sport