The differentiation of y=sin(pi*x) results in y'=cos(pi*x)*pi due to the application of the chain rule. When differentiating a function where the argument is a function of x, both the derivative of the outer function and the derivative of the inner function must be considered. In this case, the outer function is sin(u) and the inner function is u=pi*x. Therefore, the derivative of sin(u) is cos(u), and the derivative of u with respect to x is pi. Understanding the chain rule is essential for correctly differentiating composite functions.