M setting is for the M button on the steering wheel. While you are driving and if you are in a playful mood you can make use of the settings by pressing the M button.
M Key setting is, when you start the car with a particular key, the setting store are your default settings. That way you don't need to change the settings every time you get in the car. These are only dynamic - suspension and chassis settings. Hope this is explained.
E92 M3 2007 - ///PE with Test Pipes and BPM Stage II; CF Interior & Splitters; CIC with Connected Drive