The quickest method to determine if you have a microphone now is as follows:
1) If you currently have BMW phone, Voice Recognition OR BMW assist, you have a mic
2) If you do not have any of those options, locate the Mic cover as shown on the left side below (sometimes located on right side), and shine a flashlight in the hole. If you can see right thru the cover you most likely do not have the mic installed in your car. Note: E46 and Z4 Convertibles manufactured after 09/03 have the mic mounted on the steering column
The Standard Mic, was the original mic installed in BMWs from 2000 until 2004. The Upgraded Mic is a newer noise canceling directional microphone that was put in new BMWs starting in late 2004. Most people prefer the Upgraded mic, although some are happy with the standard version.
Removing the microphone access panel is a very easy task, although not well documented from BMW. Below is the process to remove and replace the BMW Microphone in the E38, E39, and E46. Soon I will also include instructions for the X series and Z series BMWs.
2001 750iL shown below
Step 1) Carefully lever down the light assembly with your fingers or some sort of other rigid tool, that will not scratch the light assembly, on both sides of the light. (left side only shown below).
Step 2) Carefully lever down the cover from the front to the rear. There are two tabs on either side in the center that hold the cover in place. If needed you can react your hand in the light socket hold and release those tabs.
Step 3) Connect the only three pin plug inside the access area that fits the mic and line up the arrow on the mic facing forward. The mic wiring is sometimes taped back inside the access area hiding on the passengers side sometimes covered in a bit of BMW cloth to keep it from rattling while disconnected. BMW recommends placing the Mic on the drivers side for best audio sound quality.
THE ARROW ON THE MICROPHONE MUST FACE TOWARDS THE FRONT OF THE CAR. BMW microphones are directional and will not correctly pickup audio unless the ARROW POINTS TOWARDS THE FRONT OF THE CAR! See below image for direction
(If you look carefully in that picture you will find my Valentine One/Stealth One install peaking out from inside the overhead console.)