As boramkiv's link states, the USB/Ipod connection was an option starting with the 2008 LCI models. Your car was not spec'd with the option, it seems. An option for you to have that capability is to search "Denison Gateway 500"
2008 550i Sport
Space Gray, Black Dakota, Bamboo Anthracite
SAT, Sat, Shades, Cold Wthr, Comf Access, Nav,L7, PDC, LUX V3 AEs, BMW Perf. Grilles, HID fogs, ACS Roof Spoiler, M5 Lip Spoiler, RPI GT Exhaust
2006 Corvette Conv, Z51,6sp (wife)
2007 Honda CBR1000RR
2005 Triumph Daytona 650 (wife)