Its a direct replacement for the standard paper one but made from the same material as a conical filter. The benefit is that it doesn't suck in all the hot air in the engine bay. I'm not sure if its possible but with my Focus I fitted a larger intake from the ST model to improve airflow into the standard airbox.
Panel filters are often responsible for failures of the MAF, especially oiled ones. A good induction kit with a turbo back exhaust will help an engine breathe more freely which helps pick-up, mate it to a remap and your cooking!
I've heard some guys in other forums reckon a panel filter gives them 10bhp, if only. It's called the placebo effect. But try explaining it gives them the square root of feck all.
I've had no problem with panel filters either, as already mentioned above make sure there is no excess oil, Jabba bake theres to dry out some of the oil, and as for increases in power, Jetex on Focus 1.8 TDCi 125bhp, with remap 146bhp, remap + Viper induction kit 145bhp. Standard the Focus was 113 although I have not power runs without the panel filter.
I think most of the reputable tuning companies will tell you that the stock paper filter is well up to the job, even on heavily modified engines. So basically why waste your money?
The stock filers are cheap and don't need changing that often.
There is talk of oiled filter causing problems with MAF's. Now this may or may not be true but as the panel filter/induction kits provide no performance benefit, why risk it?
People will continue to fit such filter but I see no point in spending my hard earned money on something which will potentially damage my car without giving me any benefit.
Also, check out this post for extra infor on replacement air filters. It's a bit of an eye opener. (scroll down to about half way doen the page).
a K&N filter should be cleaned and reoiled every 8-12,000 miles. The 'recharge' kit is £10 and will last for 4 charges. That means the correct A3 panel would cost £45-50 for 4 years motoring. You could change a paper one every 8,000 miles for less than half that and personally would rather have clean paper filter then one covered in sticky oil!!
I've got a K&N Panel filter (oiled cotton - £30) because I have a custom made airbox, along the lines of a Dbilas intake (but didn't pay £250 for it), and couldn't find a paper filter that was the right (small) size. I have the benefits of increased linear flow like a CAI kit and improved filtering like a panel filter. Once I have an FMIC and remap I'll see the full benefit.