Where does imaging come from?

Imaging is created in your brain, by the effects of your ears hearing the different sounds coming from the 2 channels of the speakers. Ears work in binaural, and can "triangulate" the position of an object based on the way the sound reaches both ears. When the recording simulates this, it appears to the listener as an "image" that is located in a certain place.

I understand the physiological part, but my question is how is the information coded at the studio for imaging to occur? Especially in sessions where all the artists are recorded individually...

Is it a simple matter of the studio engineer using a "balance" knob (to create left-right imaging) in conjunction with a volume knob and a basic effect knob (to create depth), much like on a stereo?

I always thought that the "Imaging Fairy" sprinkled it on your system??? :)~

Yes, it's like using a balance knob on the mixing board. It's called "panning".

so panning accounts for left-right axis imaging and volume accounts for depth?