Where does imaging come from?

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?

Dubzilla, what you described above - balance, volume, effects - are all part of audio engineering. However, there is a lot more to audio engineering than just panning, volume and effects. Depth, height, air, etc is heavily dependent on miking/recording technique. This is how the real imaging magic is captured.

Without good miking/recording technique, mastering can only go so far...

For studio albums where each instrument is recorded individually :
a) Imaging is done with a balance control.
b) depth can often be achieved through compression and/or reverb. For example compressing the vocals has the subjective effect of bringing them closer to the plane of the speakers. Less compression pushes sounds to the back of the mix.
Also a sense of depth can be achieved by adding reverb (either natural using a reverberant room) or artificial to the sound ... conversely removal of reverb (via very close mic'ing and a very dead room) brings a sound closer to the front of the mix.