Generally, the next two numbers denote the engine size in liters, i.e. a 325i and 525i both have a 2.5 liter straight six, 330i and 530i have a 3.0 liter engine, etc.

BMW is not always consistent with this (nor is MB). For instance, when the original V8 was introduced in 1994, it came in a 4.0 liter displacement and was installed in, reasonably, the 540i and 740i. In 1997 (I believe), BMW upgraded the engine to 4.4 liters, but retained the 540i and 740i badges. Why? Who knows? Similarly, when BMW dropped the 1.8 liter 4 cylinder (318i) from the previous generation 3 series (E36), it needed a new entry level model to sell below the 328i (2.8 liter six). They had a nice 2.5 liter six, but to create "space" between the high and low end of the 3 series, they detuned the 2.5 liter from 189 to around 165 hp, and called it a 323i - even though it was 2.5 liters. The badging carried over into the first year or two of the current generation 3 series (E46) until an enlarged high end six (3.0 liters) was introduced into the 330i, at which time they bumped the 2.5 liter six back up to its previous 190 or so hp, and renamed it 325i.

As far as the letters, "i" used to mean "injected", just as "E" for MB stood for Einspritzung (injected). Over time, as all cars have become fuel injected, it really no longer means anything - the "i" version of any car simply means a normal sedan. In the 3 series, various additional letters have been used to denote the coupes and convertibles; the E36 coupes were "is", i.e. 318is, 325is, 323is, 328is, and the convertibles were referred to informally as the "ic" (I don't believe there was ever a decklid badge that called it that). That nomenclature changed for the E46, so that coupes are now "ci", and the convertibles, which carry "ci" decklid badges, are referred to informally as "cic". 5 series have always been pretty straightforward, with the exception of the 535is in 1988, the last year of the E28 style, which denoted a sports package attached to a regular 535i. In 7 Series, the short wheelbase cars are "i", the long wheelbase cars are "il", similar to the old distinction between SE and SEL.

There's more (ti was the briefly sold 3 series hatchback, the 850csi was effectively an M8, "it" is a station wagon, "ix" or "xi" means all wheel drive) but it gets pretty arcane.