I copied and pasted Mole7374's response to this exact topic where it is broken down pretty cleary. I'm sure he won't mind as he is on the same side I am on this! Here goes:
"We'll this is definitely the most heated topic on the boards nowadays b/c BMW has done an awful job of providing info around it.
DHP has become very confusing b/c some people believe it does more than it actually can...
There are two things within the X3 that matter for this conversation. (well more than 2 but let's start there)
Driving Dynamic Control
DHP (Dynamic Handling Package) --the name on this one is part of the problem.
Let's start with the easy one... DHP is as AzNM put it, an "active" dampening system in the suspension....no do NOT get this confused with those rocker (normal/sport) switches near the shifter...more on tht later. DHP is a SUB-SYSTEM to driving dynamic control. (more on that too in a bit) DHP's SOLE PURPOSE (and I repeat sole purpose) in life is to provide an ACTIVE suspension setup that basically works to push the tires towards the ground to keep the X3 connected to the road...and it also helps to eliminate body roll by "actively" positioning the car so it's not flopping around all over the place. (this woudl be sport mode) In normal mode it kind does the opposite where its job is to absorb bumps and provide a more relaxed drive.
That's it...nada...nothing more nothing less....DHP is NOT responsible for variable steering and it is NOT responsible for the throttle changes (ie quicker) and it is NOT responsible for performance control.
Performance control is a sub-system to dynamic driving control too (and it can run independent of all of them) Like Az said, performance control works to keep torque towards the rear wheels and it will active look to help break the inside wheel/accelerate the outside wheel in a hard turn. (kinda a poor mans torque vectoring) This is performance control....period.
Now...what do you say is dynamic driving control???? That is the OVERALL system that these things can fall under. (ie the normal/sport rocker switches in the car) Dynamic driving control does all the work globally changing the "PERSONALITY" of the car...those rocker switches are NOT solely included with DHP. How do I know it? I have my X3 and they have the switches and I do not have DHP. Driving dynamics control (DDC) DDC is what puts the car in to "normal/sport/sport+" modes. (DHP DOES NOT DO THIS) WIth a non-dhp X3 you can ONLY get DDC if you buy a 35i with the sport package..that is it! You cannot get DDC on a 28i unless you buy DHP...this is where the confusion comes in and is the reason why everyone is arguing over this...I've personally been involved in like every thread on this topic only b/c I've researched it to the bone and have been trying to provide clarity, although most people want to argue...I'm sticking to the facts though. Anyway...like I said, you cannot get the three modes in a 28i unless you buy DHP...and when you do that this is what happens: In a 28i---add DHP package which in turn----first add DDC---performance control----variable sport steering----DHP. That's it. Now...it gets more confusing in a 35i because if you have a 35i WITHOUT the sport package the car will look identical to a 28i without DHP. Now...when you add the sport package everything changes..this is what happens: Add sport package----DDC is added...DDC on the 35i without DHP also includes modifications for the chassis and steering and throttle...this is what DDC does in a non-DHP car. ..and yes yes yes yes yes it does do the suspension/chassis mods...trust me it does...the idrive screen shows te changes and when you drive the vehicle you can feel it. The difference is this... in a non-dhp X3, the chassis changes are NOT ACTIVE like with DHP....meaning...when I flip into sport mode in my X3, I can feel a stiffer chassis/suspension..but that't is...the car does not actively monitor/adjust the suspension on the fly...it just goes into "stiffer mode". However the throttle response AND steering are also adjusted...I do not however have performance control...and by the way DHP is also referred to as "EDC" or electronic dampening control....just an aside on that. When you go into sport mode you can absolutely feel everything change....and it allows you to configure the chassis and drivetrain independently...I've messed with that and it feels different.
So here's the thing...know what you are getting into b/c some people only want what I have, but think that they only get it with DHP...thus BMW is making extra bucks from confusion (planned maybe?) DHPs dark secret it this... in "normal" mode with DHP, the car rides in "comfort" mode which is DEFINITELY more cushy...it feels more like a lexus (ok not that bad) but not as muich like an X3. In normal mode with non-dhp the car rides in "normal" mode (which is a balanced setup). In sport mode with non-dhp and dph the car rides in sport mode...and again the difference is that sport mode in non-dhp is just a firmer switch that turns on whereas in dhp cars the x3 is activing monitoring/changing the setup PER WHEEL to provide the associated feel....again that's PER WHEEL in each mode...
Sport + is basically where you are wanting to go around a track and you want the stability control systems turned off so you have more driver control (ie you want drifting).
So again know what you are getting into b/c it is an expensive package and if all you want are mods to the feel, then a 35i with SAP does it...if you want the more active suspension then DHP in either car will do it.
Now those are the facts and now I'll give you my opinion. First drive both...and drive them extensively...it will be hard to find a DHP car but drive it...I'm serious. I drove both for a decent amount of time and you'll never know what you want personaly by reading the boards. And ask GlenE (on this thread) He drove both for several thousand miles and has more hands on experiance than all of us. If you have the money and don't car, get DHP..it is a VERY COOL system and if it's there why not. However....if money is tight then do more research although everything I posed is 100% accurate. In my opinion, if you really really really want a super handling and agressive setup and plan on driving it that way, #1 remember it's an SUV and NOTHING that any system will do is gonna make this feel like a 3 series. My X3 handles VERY GOOD but it's not a sedan...just a fact. If you tell me that you drive like a ralley star and need these systems, but you order your tires and wheels with all season tires and not performance tires, I'll say you are wasting your money. I'd argue that a non-dhp x3 with performance tires will handle better than a dhp x3 with all seasons...I know you have to balance everything but I've seen people make the argument that they drive super super agressive, and then their X3 has all-seasons.....and this really applies to sport+ mode b/c if you are going to do stuff like drifting etc, all seasons will break free and you'll be wrapped around a tree. I also have an STI which handles better on 2 wheels than an X3 on all 4, however if I put all seasons on it I'd be around a tree too. (maybe)
I hope this helps and doesn't cause another contentious thread b/c I can't argue this point any more...it's allllllllll over every board. I'm also including a few links to back up what I'm saying for you....
Also...last thing... .I'm attaching the actual owners manual for the X3...like the document that legally represents our vehicles...like the document that hast to accurate or else they are legally on the hook...please go to pages 88 and 89 for some language also supporting what I'm saying.... and you'll also see in there that the suspension mods do also apply to non-dhp cars.