The sports model is thought to be a potential replacement the current BMW 1 M Coupe.
As for the looks, reports say the BMW 2 Series will take on a similar body style to the current 1 Series Coupe and offer rear-wheel drive dynamics, whereas the next BMW 1 Series will take on a front-wheel drive platform and be presented in a more compact hatch layout.
It's too early to tell if a potential M2 will be available as a convertible but the sports model will apparently provide the M range with a more clear-cut 'M2' name, compared with the current 1 M Coupe. (The 1 M couldn't be named the M1 due to the company already giving that badge to the M1 supercar.)
Rumour has it the BMW 2 Series will hit the market sometime in 2013 after a big public unveiling in 2012.