A note plays somewhere in the stereo field and you place it on a left-to-right slider. Precise stereo placement is what makes a mix feel wide and organized, and it starts with hearing exactly where things already are.
At level 1 you can be off by up to 35% and still be right. The accepted margin shrinks every level, to 3.5% at level 10, where telling 'slightly left' from 'centered' is the whole game.
Start on headphones: the left and right channels are fully separated, so small differences are easier to hear. Then check yourself on speakers, where the image is more natural but less precise.
Because the level difference between the two ears is tiny there. A sound panned a few percent off center is only slightly louder on one side, which is exactly the kind of detail this exercise trains.