Pan is the God of the shepherds and of their flocks.  His father was Hermes, and his mother was a nymph.  He was born as half goat and half man.  Because he did not turn out full nymph, his mother hated him.  Obviously hating your unperfect children was a fad in those days considering what Hera did to her son Hephaestus.  His mother was the laughing stock of the nymph population for having "goat man".  Hermes was still protective of his family though, and turned one of the nymphs who showed up at their door to laugh in their faces, into a reed.  This inspired Pan to create the shepherds pipe out of bound reeds of different lengths.  Pan lost in a contest against another man even though Pan was playing his own instrument.  Pan was so weird that he caused sudden fear to come upon people when they saw him.  Hence came the word "panic".