Whereas sex refers to someone's anatomy, gender is more about someone's sexual identification or orientation. Gender refers to the roles and qualities that society associates with being either male or female.
Pangender is a term for people who feel that they cannot be labeled as female or male in gender. These people feel that they are: mixed gender, identify equally with "both" genders, are both male and female, feel that they are genderless or feel that they are some other gender all together. The term is meant by the queer community to be one that is inclusive and means "all genders".
In some cases, these individuals are able to live with the majority of the physical characteristics they were born with, but frequently display the outward appearance, behavior and/or clothing of the opposite gender. In other cases, they were born with both sets of genitalia. Pangendered individuals are happy living "in between" and have no desire to live exclusively as one gender or the other. However, problems can arise with pangendered individuals as a result of the intertwined nature of gender identification and sexual gratification making it a difficult subject to talk freely about. Because of the sexual aspect it can become easy for others to dismiss them as "fetishists" and ignore the gender identification aspects of their make up.
See Also: Gender Variance, Pansexuality