That's because '\n' is a character. It's counted towards the total length of the string you're outputting. That's why "Pay" is bumped to the left by two spaces. If you don't want that, you could always do << setw(10) << "Pay" << "\n\n";.
If you're going to keep posing code, use the [code][/code] tags. Also, I'm not sure what you're asking. As for the way this works: cout << setw(10)<< "Pay\n\n";.
setw: "I'm supposed to make sure that the next thing to be output takes up 10 spaces!"
setw: "Oh, it's a string! I wonder how many characters it has?"
setw: "...I count 5 characters."
setw: "Cout! Print 5 spaces and then this string!"
cout: "OK... printing ' ', ' ', ' ', ' ', ' '..."
cout: "Printing 'P', 'a', 'y'...."
cout: "Printing... wait, this is '\n'! This doesn't get printed!"
cout: "'\n' tells me to start printing on a new line."
cout: "OK, new line! What, another '\n'? Fine, new line again!"