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.

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