Here's why:
* Gerund: A gerund is a verb form ending in "-ing" that functions as a noun.
* Gerund Phrase: A gerund phrase is a gerund plus any modifiers or objects.
* Subject: The subject of a sentence is the person, place, or thing that performs the action of the verb.
In this case, "children singing" is the noun phrase that is the subject of the verb "is". The sentence tells us that the sound of children singing is one of the speaker's favorites.