Your pan pots change the balance of stereo sound by increasing the volume in one side and/or decreasing it in the other.
With linear panning, lets say you pan your track 80% left. Panning to one side means simply cutting the other side by an amount. This means all you're really doing is cutting out 80% of your right channel. The end result is that your audio is going to sound much quieter. You're adjusting the volume at the same time that you're adjusting the position.
With circular panning, they make an effort to adjust the overall loudness so that your audio track sounds about as loud regardless of where you pan it. The idea is that you're adjusting the position without affecting the volume.
Bascially, just leave this as default, which should be circular. This is one of those settings that you generally need a really good reason to change, but they include it (as they should) for the very few who need to change it for whatever reason.