This is a type of projection for mapping a portion of the surface of a sphere to a flat image. It is also called the "non-projection", since the horizontal coordinate is simply longitude, and the vertical coordinate is simply latitude. The equirectangular projection was used in map creation since it was invented about 100 A.D. by Marinus of Tyre. See Mathworld's page for more detailed information on the mathematics of this projection.
In an equirectangular panoramic image all verticals remain vertical. Coordinates in the image relate linearily to pan and tilt angles in the real world. The poles (zenith and nadir) are located at the top respectively bottom edge and are stretched to the entire width of the image.
Images in the Equirectangular projection are used as the image source by several spherical panorama viewers, including PTViewer.