I've read every article I could find over the years on octane and what is necessary. All new(er) cars have knock sensors and the computer (ECU) will adjust to the octane to prevent pinging (pre-detonation) which prevents engine damage. The only time you'll have a problem is if a knock sensor goes bad and you'll both hear the pinging and feel the drop in performance. In that case, be SURE to run the highest octane possible until the sensor is replaced. However, when everything is working correctly, you won't damage your engine with lower octane, but you may also suffer a performance hit and lower fuel economy.
As a couple of the previous answers explain, you sometimes don't save money buying the less expensive gas, but I'd recommend using "Top Tier" fuel because the studies show the fuel system stays much cleaner. All the major brands (ex. Valero, Exxon, Shell, BP, etc.) are Top Tier and QT is the only convenience store brand in my area that is rated Top Tier.
We've tried Regular, Mid-grade, and Premium (10% ethonal) in my son's '04 325i (E46/M54) and settled on mid-grade. We didn't see any significant improvement in fuel economy or performance with premium, but we did see a drop-off when running regular. I'm sure every different series of engine performs a little differently.