Terminal 1 - Negative
Terminal 2 - Positive Out
Terminal 3 - Positive In
Terminals 1 and 3 can be interchanged as they are opposite ends of the same resistor. The middle terminal (2) is connected to the wiper that slides along the length of the resistor and varies the resistance from middle to each end. This is a type of voltage divider circuit.
The potentiometer needs to have a high enough Wattage rating to handle the current drawn by the motor at its operating voltage. Also the potentiometer's resistance needs to be chosen based on motor characteristics and input voltage.
Here's a link for more reading: https://en.wikipedia.org/wiki/Potentiometer
There are upsides and downsides to using a voltage divider to control a motor's speed.
Upside: Inexpensive
Downside: wastes power, creates heat
A variable DC-DC Converter is more efficient, but costs a bit more. It's also easier to design the circuit.
