Here's why:
* Gerund: A gerund is a verb form ending in "-ing" that acts as a noun. In this case, "singing" is the gerund.
* Gerund Phrase: A gerund phrase is a gerund plus any modifiers or complements. In this case, "children" modifies the gerund "singing", making it the complete phrase "children singing".
The entire phrase functions as the subject of the sentence, telling us what "one of my favorite sounds" is.