This is the first look at the secret wide photo mode for the iPad camera, hidden in Apple's iOS 5 software.and
A panoramic photo is a wide photo, wider than the camera lens can handle in one go. Instead, you sweep the phone across the scene in one motion and the camera captures multiple images, then stitches those pictures together into one widescreen image.
To snap a wide picture, it seems you'll choose the panorama option from the camera menu, then simply tap the camera button and move your phone left to right, as directed by onscreen guidelines.
The movement and multiple images also mean a camera can create a 3D panorama. Many cameras and phones let you do just that, even if the camera isn't a 3D model and doesn't have a 3D screen. Apple hasn't shown any interest in 3D up to this point, unlike Sony, and others, so it's unlikely the iPhone will do 3D panoramic shots. 3D is just the sort of Apple likes to stay away from.
If you have a jailbroken iPhone, you can use the panorama mode by downloading Firebreak from outlaw app store Cydia.