Pano Head is also called tripod panoramic head, or rotator. To understand the function of pano head, "nodal point" should be explained first. The nodal point is a special point in space, where light enters the lens converges into a point and then diverges to impact on the recording medium. As one rotates a camera and shoots a sequence of images to later be stitched together, all of the images must be shot with the camera rotating about its nodal point! The pano head is just used for this purpose.A panoramic head is an additional piece of equipment to put on top of a tripod which can be small or very large. It allows the camera to be located so that one of the nodal points of the lens is perfectly on the axis of rotation.
It will cause parallax to shoot with DC and fisheye lens without using pano head. Illustration is as below.
Note: Above panorama image is stitched from images shot without using a pano head. There are obvious misalignments caused mainly by "parallax". By using a pano-head, the camera can be rotated to take a set of pictures for making a panorama without suffering from "parallax".
If you want to know how to adjust pano head, you may also refer to http://www.panoguide.com/howto/panoramas/setup_panohead.jsp