A potentiometer is a manually adjustable variable resistor with 3 terminals. Two of the terminals are connected to the opposite ends of a resistive element, and the third terminal connects to a sliding contact, called a wiper, moving over the resistive element. The potentiometer essentially functions as a variable resistance divider. The resistive element can be seen as two resistors in series (the total potentiometer resistance), where the wiper position determines the resistance ratio of the first resistor to the second resistor. If a reference voltage is applied across the end terminals, the position of the wiper determines the output voltage of the potentiometer.
A variable resistor is a resistor of which the electric resistance value can be adjusted. A variable resistor is in essence an electro-mechanical transducer and normally works by sliding a contact (wiper) over a resistive element. When a variable resistor is used as a potential divider by using 3 terminals it is called a potentiometer. When only two terminals are used, it functions as a variable resistance and is called a rheostat. Electronically controlled variable resistors exist, which can be controlled electronically instead of by mechanical action. These resistors are called digital potentiometers.