In 2003 for the 2004 model year the X5 was face-lifted with new headlights, a few new exterior colors, a new four-wheel drive system and upgraded engines. The grilles were enlarged, as well as their actual slats being modified in a 'flame surfaced' style. In keeping with the E39 facelift of 2001, the 2004 X5's headlights got "angel-eyes" (rings or halos around all front headlamps). The tail-lights also received a facelift similar to the BMW E39, and the exterior glass went from a "dotted" pattern to a cleaner "line" pattern. BMW invented a new four-wheel drive system dubbed xDrive shared both in the X5 and X3 in 2004. Instead of using the previous X5 system which consisted of power being split 62-38 (rear wheels-front wheels) and DSC to brake wheels losing traction, xDrive could vary power to the front or rear axles in milliseconds, transferring up to 100% of engine power to either axle, thus allowing the vehicle to regain traction quickly.
The X5 4.8is first started shipping in April 2004. In had a new larger 4.8 L engine (which replaced the 4.6 L engine). It also included a slightly modified bodykit (parts of the bottom bumper became painted the body color), 20" wheels, and along with the 4.6is, were the only X5's ever to have a large chrome-tipped exhaust which hid the quad pipes.
Source: Wikipedia, 2012