Josh, check out this thread:
300E Ignition Timing
About 10 posts in they actually get around to explaining how it works.
To answer your question, yes, the timing is controlled by the engine control computer depending on rpm and engine load. There is a way apparently, to gain an additional 6 degrees of advance, in 2 degree increments, by changing out a resistor, but I'm not positive it applies to your car. See this thread:
READ!!! Free HP for W201 & W124 owners! (Pictures!)
Hope this helps,