There are actually 3 KAOSS pads at your disposal per channel, each with a X and Y axis. The idea is that by putting the stylus on the pad, you are actually inputting an X and Y coordinates to the software which in turn determines the corresponding values for whatever effects were assigned to the X and Y axis. In the first 2 KAOSS pads, you have the ability to control NOTE and GATE for pad 1 and PAN and VOLUME for pad 2. These have corresponding grids in sequencer (SEQ) mode.
The 3rd pad is quite free-form as you can select (from a list) a bunch of effects on the X and Y axis. When you record, whatever is stored will also appear in the KAOSS X and KAOSS Y grids of the corresponding sequencer (SEQ).
What's great about these KAOSS pads is that you can play around with the stylus on the pad, record something and then go in the sequencer to see what you have done and edit it !
With the KAOSS pad, you can pretty much do all the music creation as mentioned above but you can also "jam" with it. If you don't record, you can apply all kinds of effects to your music as it is being played using the stylus on the pad. It is like free-styling your own tunes.
In the video above, we make use of the KAOSS pad (number 3) to control the CUTOFF (KAOSS X) and the PEAK (KAOSS Y) of an existing random melody. Once we are happy with what we hear, we start recording. Then, we go into SEQ mode and see that the recording shows up in the KAOSS X and KAOSS Y grids of the sequencer. Neat!
In this second video, we change what the KAOSS X and Y axis control on pad 3. We choose (for whatever reason) OCTAVE for X and DRIVE for Y, record something and then go back to the SEQ to see that the KAOSS X and Y screens contain what we have just doodled on the KAOSS pad.