The potentiometers measure the movement (or position) of each the analouge axis, X (roll) and Y (pitch), Z (yaw) and the throttle(s) of course.
So whatever input you give, it's mesured by them. Having a high resolution means they can notice even the smallest movements of the stick, and give a very smooth input to the game. OTOH having a low resolution "pots" means generally "jerky" unprecise game inputs.
In case of the Cyborg X, the resolution is higher than what I can do with my hand. That means even for the smallest amount of movement that I can do, the stick can even detect positions in between.