xDrive is an AWD system that constantly monitors driving conditions and changes the power distribution front/rear accordingly. It's much more flexible and results in a more enjoyable driving experience than a typical fixed AWD system. BMW has always believed that rear-wheel drive is better, and even their older AWD system had a rear-bias (38/62). A fixed 50/50 system might be more stable overall, but it's definately not as fun to drive and lacks the ability to shift power around.
For details on the xDrive system, read the link. There's plenty of instances where the X3 operates in rear-wheel drive only (parking, high speeds, dry cornering, etc)
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