That number plate you see in the car is the old format here in Spain. Answering your question: M stands for Madrid..and for example B would be Barcelona, V for Valencia, BI would be Bilbao, etc.
Many people made new European versions of the old number plates (so if you travelled abroad with your car you wouldn't need the classic white sticker with an E) but I don't like it, I like to maintain originality..
Unfortunately the new European number plates from 2000 onwards dont have the provinces. The original idea of the government was to make them just like in France or Germany with the different regional flags, but here in Spain the issue about the regionalities with their own language and particularities makes it kind of touchy issue...so at the end they decided the easiest thing was for all cars from Spain to have the same format.