The Pan Opticon society is one where everybody is under the illusion they're being watched constantly, but they can't see the observers. The stronger this illusion, the more people feel they have to perform for the watchers, which makes the Pan Opticon useful as a method of crowd control.
The phrase was coined by the nineteenth century Philosopher Jeremy Bentham, who saw it as a principle for architectural design, especially in prisons. The original Panopticon prison was circular, with the cells built into the curve of the circle facing inward and the guard tower positioned in the middle. The inmates can't see each other, nor can they see the wardens who are behind one-way glass. The design works because the feeling of being watched is with the inmates constantly, making them regulate themselves. In one form or another, all modern prisons are built to imbue prisoners with this sense of being seen without seeing, with one-way glass or security cameras.
The Pan Opticon has been explored extensively in film and literature, and now in pop culture. Orwell's 1984, for example, or the Big Brother and Survivor TV shows, or The Truman Show (where the star of the show doesn't initially realize he's being watched).
It's tempting to compare this human behavior with the Heisenberg uncertainty principleD, which applies only to subatomic particles, but the Pan Opticon is all about the illusion of being watched, and not the act of watching itself. Mount a dummy camera on a wall and people will behave differently when they're around it. Whether they're consciously aware of it or not, they perform for the camera, like straightening their slouch, sucking in their stomach, or even concentrating harder on “being comfortable” (an act that can be overdone, which is what airport customs officials are looking for in deplaning passengers).