kristie, metformin basically makes the body more sensitive to insulin. For people with type 2 diabetes, it allows them to more effectively use the insulin they produce.
In the case of PCOS, it is caused by insulin resistance. This means the body has to essentially flood your system with insulin in order to control blood sugar levels. By making the body more sensitive to insulin, less needs to be produced and hormone imbalance caused by having too much insulin can start to correct itself.
Did you have a glucose tolerance test? I believe that's the only way to diagnose insulin resistance. When fasting, my blood sugar levels and insulin levels are normal, however during my GTT it was found that my blood glucose remains normal, but after I had the sugar drink my insulin levels went sky high - what should never have got above 60 hit 273 - that was the indicator that I am severely insulin resistant.
Some further reassurance for you - I have a friend who looked up a lot of the recent studies on metformin and the treatment of PCOS. It was found to be beneficial even when insulin resistance was not present. Trust your doctor - it's a fairly new treatment for PCOS, but it is effective.
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