An input is an event which has been assigned some kind of characteristic.
The system will first check if an input is assigned a function, if not it will check if it is a control input (e.g. a control pad) and finally it will check if it is a collision object (only relevant to things like area 2d's etc). If it hasnt done anything with any of these it is an unhandled input.
For example lets say you havent assigned P to anything, when the user clicks P it will run through that and conclude there is no handling of the event and go to any code you have for unhandled events. Now if you go to key mapping and assign P to a function like pause, the game will check and find it is assigned to a function so it will never fall to an unhandled event code.