The OBDII connector and its basic functions have been mandatory on all production cars sold in the US since 1996. It is NOT the roundy connector that BMW has traditionally used until recently, and must be in the passenger compartment, as one of the government requirements is that the connector not be more than 2ft away from the reach of the driver. I don't know if it was mandatory for existing car models to be completely redesigned in 96 to accomodate this so it might be possible that E36s for example require an adapter and cable that plugs into the roundy plug.
On a E46, the OBDII DLC is under a flip-open hatch under the dash above the footrest. In fact, starting with MY01, I believe, the old roundy plug has been completely replaced and BMW proprietary functions are also accessed through the OBDII DLC. This also eliminiates the need for the now-ubiquitous SI reset tool, as it no longer fits anywhere, and the reset procedure can be done with your ignition key and the odo reset button or something.
I've used Vehicle Explorer with it as well and although it doesn't have every function available through it like GMs and Fords, its enough to be useful.