A PAN refers to the interconnection of devices around a person. An example will help clarify what I mean here. I am a keen runner, and I track all my runs using a Garmin Forerunner 920XT watch. When I finish my run, my watch synchronizes with the Garmin Connect application that's running on my phone. It does this via a Bluetooth connection, and no data that's transmitted between the two traverses my LAN. Another example that's becoming more prominent is Bluetooth headphones that are connected to your phone. While both of these examples use Bluetooth, other technologies that can be used include infrared, Wi-Fi, USB, and Firewire.
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