Stereo sound involves the use of two different sound tracks, each coming from two different speakers, to create the impression of sound coming from different directions.
In the case of FM radio, the stereo tracks are created by using the FM mono signal (transmitted on the main carrier frequency, as heard on a mono FM radio) and a "difference" signal transmitted on the 38kHz sub-carrier. The difference signal (38kHz) sub-carrier is modulated using Double Side-Band Suppressed Carrier (DSBSC), which uses the "stereo pilot tone" on 19kHz as a phase reference. The 19kHz sub-carrier tome also switches on the stereo decoder of a stereo FM radio, and lights the "stereo" light.
Not all Pirates, especially in the early days (1980s and before), have broadcast in stereo - partly due to the cost and complexity of stereo encoders, partly due to the difficulties of transmitting stereo over a studio-to-transmitter RF link. In addition, stereo sound only gives decent quality over a fraction of the mono coverage area, so stereo transmission is hardly worthwhile for a low-power pirate covering a small area.
Some pirates have been known to cheat, by transmitting the 19kHz pilot tone but no 38kHz stereo sub-carrier. This lights a stereo radio's "stereo" light, but the sound will still be mono.
A number of Medium Wave stations broadcast on AM Stereo in some countries, notably the USA. A number of systems are used for AM stereo, the main one being C-QUAM - based on "quadrature modulation", in which the stereo information is transmitted on a DSBSC signal 90 degrees away from the carrier. Another system is independent sideband, in which the upper and lower sidebands transmit the left and right hand channels separately.
No pirates are known to have used AM stereo. In the mid 1980's, however, there was an abortive project for an AM stereo offshore pirate, from the MV Communicator (of Laser 558 fame), called Stereo Hits 576.