The pan control in audio gets its name from panorama or panning action in moving image technology. The audio pan control can be used in a mix to create the impression that a source is moving from one side of the soundstage to the other, although ideally there would be timing and reverberation differences present for a more complete picture of movement within a defined space. Simple analog pan controls only change relative level; they don't add reverb to replace direct signal or change delay timing.
Panning can also be used in an audio mixer to reduce or reverse the stereo width of a stereo signal. For instance, the left and right channels of a stereo source can be panned 'straight up', that is sent equally to both the left output and the right output of the mixer, creating a dual mono signal.
The pan control or pan pot has an internal architecture which determines how much of each source signal is sent to the two buses that are fed by the pan control. The power curve is called taper or law. Pan control law might be designed to send -4.5 dB to each bus when centered or 'straight up' or it might have -6 dB or -3 dB in the center. If the two output buses are further combined to make a mono signal, then a pan control law of -6 dB is optimum. If the two output buses are to remain stereo then a pan control law of -3 dB is optimum. Pan control law of -4.5 dB is a compromise between the two.
A pan control fully rotated to one side results in the source being sent at full strength to one bus and zero strength to the other.
The pan pot is not the same as a balance control on a consumer stereo receiver. The balance control takes a stereo source and varies the relative level of the two channels. The left channel will never come out of the right speaker by the action of a balance control. A pan control can send the left channel to either the left or the right speakers or anywhere in between. Note that mixers which have stereo input channels controlled by a single pan pot are in fact using the balance control architecture in those channels, not pan control.