The pseudo terminals are used for creating or implementing terminal emulators such as xterm.
According to :
Pseudo terminal is a pseudo-device pair that provides a text terminal interface without associated virtual console, computer terminal or serial port hardware. Instead, a process replaces the role of the underlying hardware for the pseudo terminal session.
According to  man page:
Data read from the pseudo-terminal master is interpreted by the application in the same way a real terminal would interpret the data, and for implementing remote-login programs such as sshd(8), in which data read from the pseudo-terminal master is sent across the network to a client program that is connected to a terminal or terminal emulator. Pseudo-terminals can also be used to send input to programs that normally refuse to read input from pipes (such as su(1), and passwd(1)).
The tty command would output something as follows, if it was run on a true tty:
- Pseudo terminal From Wikipedia, the free encyclopedia wikipedia
- pts(4) man page