Trans computer monitors input and output shaft speeds (nothing fancy, just a sensor that outputs a frequency), and compares this to expected relationship based on what it told the trans to do. For example say it calls for third gear, but since doing so is only changing pressure solenoids, it relies on the feedback of shaft speeds to determine if orders were carried out, and also how quickly.

I'm simplifying here, but in general, if it doesn't see what's expected, it'll try the next gear, etc. until it doesn't perceive a slip. Included with this is usually default to max pressures, etc. in an attempt to not strand you.

So the thing is, when a certain thrust bearing begins to fail, the trans cannot hold clamping pressure on the "A" clutch, and under even moderate load it will give way (slip). This clutch is used in gears 1~4, so when this is happening, you end up in 5th. After shutting off for a very brief period, the trans will try again as if all is normal, even though the SES light is on (fault code set). Almost certainly the code will be one if the trans codes reflecting implausible relationship related to a given gear ratio. It can throw you off sometimes since you can read and reset the code, and next time same behavior but different code is set. But that's just because as this is failing, the slip and fault may occur in a different gear than the previous event.

IF this is happening to you, you are in a populous club indeed. Standing room only. So go forth and check the usual suggestions; such investigatory steps are generally painless, but do prepare yourself.

Read through the various posts on this topic (there's plenty), and note there are also a number of ways to approach the repair. Warning: BMW dealerships don't fix, they replace, and for some reason generally charge a hell of a lot to do so. Others have used independent's to handle the whole thing; some I know handled the removal & replacement but did an exchange to obtain replacement trans, and a number of us have popped it out, disassy and replace parts, reassy and reinstall.

So go through your deductions and get opinions (note - opinions from dealerships or repair facilities are not unbiased, no matter how honest the facility, simply because they are in business to provide a service). Ya just gotta deal with it all.