Why did Pan blush here?

[Hector]

I'm not sure I ever understood that part. (1.10)

 

[Yoshi]

It was a gag because the Shadow Dragon blushed too.

 

[Warmmedown]

I'd say either second-hand embarrassment or because she's a teenage girl who finds the idea of a guy wishing for girl's underwear awkward in front of other people, let alone in front of her grandfather.

 

[Super Kaioken Fan]

Because Its Cursed