What is pam_panic?
pam_panic is a library which expands the common Linux authentication module Linux-PAM by a panic function.
What is a panic function?
In general
Imagine you are in an emergency situation, threatened by someone. If you'd work in a bank you'd push an alarm button. Pushing the alarm button is a conscious and deliberate panic action which executes something to secure yourself, like a silent alarm or even a big wall coming down.
In pam_panic's context
pam_panic is another security layer you should put before entering your password (see Configuration).
pam_panic will ask you for a removable media respectively a password you've set before. There you can decide if you plug in your panic media / enter your panic password or plug in your authentication device / authentication password.
If you should enter your panic password/media you can define through flags what happens then.