That he hasn't practiced his reading. He also realized that he didn't know the meaning of some new words.
Explanation:
In the statement <em>"When he is told to read in class, what does panchito realize..." </em>Panchito has to read in class but he couldn't read appropriately because he had not practiced enough. Then, Panchito discovered some unfamiliar words in the text. As a result, Panchito felt disturbed when he was trying to read aloud.