Located about halfway between the islands of Lipari and Stromboli, Panarea is the smallest of the Aeolian Islands with an area of only 3.4 square kilometers.

Like other islands in the Aeolian arc, Panarea is part of a large, mostly submerged volcanic apparatus, at a depth of 1200 m to 1700 m, of which the emerged part represents the rim of a volcano-tectonic depression with an elliptical shape oriented in an east-west direction.

The volcanic structure covers a total of 460 square kilometers, going together to form a large cone shaped and modified not only by eruptive activity, but also by faults, erosion and shoreline variations. This results in a west coast characterized by a steep cliff, while to the east and south the slopes slope down to the sea with flat areas.

Then out to sea to the east are a series of rocks (Lisca Bianca, Bottaro, Lisca Nera, Dattilo, the Panarelli, and the Formiche) and the steep islet of Basiluzzo.

Although close to Stromboli, Panarea has a completely different volcanological history: while Stromboli is a still active volcano, Panarea's last eruptions date back tens of thousands of years, and only small traces remain of many volcanic structures.

Panarea therefore although in a state of quiescence, is characterized by manifestations that testify to a very young volcanism. There is in fact, among the islets and rocks to the east of the island, an area characterized by exhalative activity, with active submarine fumaroles, the site of major gaseous emissions in the fall of 2002.

The geological setting of the Panarea area is the result of a rather complex volcanic activity characterized by effusive and explosive events, and it is not easy to reconstruct the initial phases since most of the deposits are below sea level.

The emerged part has been built up since about 150,000 years ago, based on recent dates derived from the products of the earliest eruptions that occurred on the surface. The oldest products visible on the surface, related to the activity of multiple effusive centers, are lavas found in the western and northern parts of the island.
Following alternating periods of stagnation and resurgence of eruptive activity, predominantly of the effusive type, several explosive eruptions occurred in the southeastern part of the island around 130,000 years ago. As the lava flows expanded and lava duomes grew side by side, shaping the larger island, the seaward area at the Panarelli, Dattilo, Lisca Nera, Bottarto and Lisca Bianca rocks was also affected by eruptions.
Beginning 59,000 years ago, the eruptions became predominantly explosive. Thin layers of dark slag, attributed to these explosions, are found in several places on the island.
In the long period between the two eruptive phases, the island underwent intense erosive action by the sea and was partly covered by marine-type sedimentary deposits.
The last eruptions occurred at the islet of Basiluzzo, between 59 and 54,000 years ago. At the end of this cycle, intense tectonic activity disrupted the morphology of the island: the entire central sector subsided, as evidenced also by the archaeological remains of ancient Roman baths.

Volcanic events are still present today in the form of fumarolic activity, widespread to a depth of about 20 m, between the islands of Bottaro, Dattilo, Lisca Nera, Lisca Bianca and Panarelli. Emissions are also present on the Calcara beach and on the seabed of the stretch of sea facing the beach.

Panarea is in a quiescent condition with volcanic manifestations represented mostly by intensely diffuse fumaroles in the submerged part of the volcanic complex at a depth of about 20 m, between the islands of Bottaro, Dattilo, Lisca Nera, Lisca Bianca and Panarelli. Such emissions are also present on the Calcara beach and on the seabed of the stretch of sea facing the beach itself.

One type of risk indirectly related to volcanic activity is landslide movements. Some slopes, in fact, even under ordinary conditions, are unstable due to the high slope of the slopes.

In addition to the danger induced by the sudden sliding of rock masses, an additional danger may be the formation of tidal waves due to the entry of large landslides into the sea.

The facility in charge of monitoring volcanic activity on Panarea Island is the Etnean Observatory - Catania Section of the National Institute of Geophysics and Volcanology (INGV).
The network consists of seismicity and ground deformation monitoring systems. Periodic water and gas measurements and sampling are also carried out.

In the early morning hours of November 3, 2002, in front of the island's east coast, local fishermen sensed a strong sulfur smell and spotted the sea boiling over, with dead fish on the surface and water color change.
The phenomenon was occurring at three points in front of the island.
One area was west of Lisca Bianca in the direction of Dattilo, where the gas reached the surface in the form of bubbles a few meters in diameter.
In a second area, west of Bottaro, the gas emission was even more intense and occurred from a depth of around 20 m.

The third area occupied a smaller area, between Bottaro and Lisca Nera. Around the fumaroles, the water had a temperature around 22-23°C, not different from that measured at the island's pier, while the acidity was higher than that commonly observed in seawater.
The gas emission was so intense that the smell of hydrogen sulfide was perceptible at great distances. However, over the course of a few days the activity reduced significantly, continuing with lower intensity until January 2003.