Its known as the stereo field (with two speakers anyway). Basically by panning you are shifting sounds around the stereo image. It's a fact that extreme panning will make us subconciously listen harder which is probaly something we have evolved with over 1000's of years (listening out for predators, for example). This phenomenon is known as psycho acoustics. The properties of a piece of music can (as mentioned) be improved by making your ears listen harder and by giving each sound its own space in the mix helping to avoid clashes etc...

Similarly, reverb can be used to send a sound to the back of the mix so with panning and reverb you can move a sound back and forth as well as left to right.