Digital cameras and scanners, common sources for the Avid Pan & Zoom effect, use square pixels. Computer monitors also use square pixels but television monitor pixels are rectangular.

Source Has Square Pixels is enabled by default. The Avid Pan & Zoom effect makes the calculations necessary to produce results compatible with rectangular pixels.

When you deselect Source Has Square Pixels, the Avid Pan & Zoom effect makes no changes to the pixel shape but does apply the aspect ratio in effect for the project.