Passive compensation. The idea of this old technique is to compensate for a disturbance by an equivalent "anti-disturbance". It is not only a circuit idea; it can be seen all around us. In the specific OP's circuit this means to compensate for the voltage VGS by an "anti-voltage" - FigVGS (Fig. 2).
Fig. 2. The circuit operation is visualized by voltage bars in red and current loops in green (a geometrical interpretation).
The input voltage is obtained by the potentiometer P connected between the supply rails. For simplicity, the case when VIN = 0 V (the wiper is in the middle) is shown. AccordinglyAs a result of the voltage compensation, the output voltage is VOUT = VIN = 0 V. Let's see how this is obtained.