Where does imaging come from?

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?

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