hey Tmay...!
both guys above are right, but let me explain something else...
You asked: "Why stereo?" and it's really simple, because you have two ears.
Stereo will make you music sound more "comfortable" to your ears, as if you were sitting in an audience... not listening to an old radio.
Panning helps you give a balance between the two channels (ears).
For example: if you are in an audience, watching a stage performance, you will notice the sax player (I'm stealing Hornet's example) is standing on the right side of the stage, so the sound that comes from the sax arrives earlier at your right ear, and a little later to your left ear...that is what lets you know where that sound is coming from, that slight subtle and unnoticeable difference of time.
Try it...cover one ear entirely and try to identify with precission where sounds come from...left, right, center...
With panning you can "place" those instruments wherever you want on the sound landscape, making it more "live like" or putting everithing on one side just for fun (listen to the Beatles White album and Abbey Road carefully).
Notice that a stereo soundscape is composed mostly of mono elements, the stereo is the result of a mix and placement of those elements. So with pan you determine if a sound is centered, left or right or all of them, and you can manipulate the close/far positioning effect with the volume, that way it will sound more reallistic.
Hope this helps
Peace...
PC