Our tympanic membrane (a.k.a. our eardrum) and a microphone are both devices that measure sound intensity. When a sound arrives at our eardrum or at the diaphragm of a microphone, either of which has a certain surface area, the power in that area (i.e. the intensity) is detected. However, the intensity of a sound, as measured by an eardrum or a microphone, will differ depending on the distance from the sound's source, because the sound is being emitted from the source in all directions.
One of the ways we determine where a sound is located is by comparing the sound's intensity in our two ears. A sound that is located to one side of us goes more directly into the ear that's on that side, whereas the sound has to diffract around our head to get to the other ear, so the intensity is usually greater on the side where the sound is located. That distinction is known as interaural intensity difference (IID).
This pan~ subpatch takes one signal in the left inlet, and sends it out each of two outlets. The amplitude gain for each outlet is determined by a panning value supplied in the right inlet. This value can be supplied as a typed-in argument in the main patch, as a float value, or as a control signal.