Beats Audio is an EQ curve that is applied to the sound output of the headphone jack and the BT connection, so if you have BT headphones, the phone and software recognize this and activates the SOFTWARE EQ curve in built into the OS.
you can turn this EQ curve off or add another "sound enhancement" curve in the music player on the device.
Beats Audio is registered with Dr. Dre and affiliated companies and Dr. Dre has also licensed a line of headphones that are designed to use the Beats Audio sound curve to further produce a more richer sound experience.
the speaker on the device does not have the capacity to play any frequencies that the Beats Audio sound enhancement will affect, hence why the physical speaker on the device is not able to take advantage of the EQ setting of Beats Audio.
the marketing is not deceptive from what I have seen and many of the ads have the "*" next to this and in fine print tells you how to experience it. I do also believe the manual speaks about Beats Audio and how you can get use out of it.
and to add, there are PHYSICAL EQ boxes. they were big staples in home audio back in the 80s and phased out into the late 90s. they were changed into "software curves" on equipment (POP, ROCK, JAZZ, etc etc and so forth).
hope I was able to shed some light on this.