basic - Connecting a potentiometer

I know how to connect potentiometer, but to be honest I don't know why. I would really like to understand what I'm doing.

From what I have read the input voltage and the ground should be connected extreme terminals and the output to the middle one.

Now few questions:
1) What would happen if ground was switched with the output?
2) Why do we need all three terminals? Can't I just use two of them?

Edit 2014-07-11 9:47

So basically potentiometer is something like this. Few thoughts about potentiometer:
1) The total resistance of R1 and R2 is constant but we can split it as we want.
2) If we use just extreme terminals then it would behave like normal resistor.
3) It doesn't matter whether ground in connected to middle or extreme terminal.

Please correct me if I misunderstood the concept.

^{simulate this circuit – Schematic created using CircuitLab}

Edit 2014-07-11 10:49
Basically what I'm asking in question one and thought 3 is whether following circuit is correct if I want to measure voltage in analog input?

Answer

A potentiometer is just a variable resistor:

-> The longer the "trace" from W to either A or B, the higher the resistance.

1) What would happen if ground was switched with the output?

2) Why do we need all three terminals? Can't I just use two of them?

In general nothing, a resistor has no polarity. However, it depends on how you intend to use it (connecting only two or all three terminals to essentially have two dependent resistors)