Foucault outlines Panopticism as a system for which institutions (governments, schools etc.) wield and use power through surveillance, or rather, the fear of being surveyed.
A contemporary example of a Panoptic power structure could be the soon to be implemented National I.D. cards under Labour government. These cards will collect the information and photo identities of every British citizen in the country. This is Panoptic in the sense that the Government would take control of these records of us and be able to survey and update these records. The idea that these records exist could force people to inhibit their behavior accordingly, a proccess that Foucault refers to as "a machine for creating and sustaining a power relation independant of the person who exercises it; in short, that the inmates be caught up in a power situation of which they themselves are the bearers."(Reading Images, chapter 8 pg 83, Panopticism) This can be interpreted as suggesting that the idea of being surveyed creates a self regulating behaviour, the Government need make no display of power with these I.D. cards, they need not track down deviants using the system, but create the idea that it is a possibility through the illusion of surveillance. Foucault then describes how as a pose to a display of power that counters productivity and usefulness of society, Panoptic institutions have a "role of amplification... its aim is to strengthen the social forces - to increase production, to develop the economy..."(Reading Images, chapter 8 pg 87, Panopticism). The Government's I.D. card scheme would also have this impact, creating a nation of 'docile bodies' from which, the Government can develop it's economy and production.
*I'm very sorry that I only used two quotes in this but jamming 5 in would most likely hinder my ability to write this in essay style.
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