The function of a governor is to keep the head speed constant, independent of varying load on the motor. A constant RPM is a good thing for 3D flight since the cyclic and rudder functions (and gyro gain) will remain constant throughout the entire flight envelope. Most governors are integrated in the ESC or FBL unit, but separate units also exist.
A governor can achieve a much more constant RPM than what can be achieved with a V shaped throttle curve, mainly because it is a closed loop system (with feedback from the actual RPM). A throttle curve is an open loop system (without feedback about the actual RPM).
The inputs of a governor are the throttle value from the receiver (which should be constant, eg a linear throttle curve) and the current RPM (via a sensor on the main shaft or via Back-EMF from the motor). The desired RPM is set on the unit before flight, and the governor monitors the actual RPM, then adjusts the throttle setting accordingly to give a constant head speed.
A lot of Align ESCs have a built-in governor, but these are almost never used, since they seem to cause more problems than they solve.
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