How does Quartus pin planner know about voltage in each I/O bank?
It doesn't know. The Pin Planner is a variant of the more generic Assignment Editor, all it generates are additional constraints on the Fitter.
During compilation, the Fitter will tell you whether it can find a solution that fulfills all your constraints.
If you have Location assignments, then that is a pretty strict constraint, and if the Fitter cannot find a valid configuration, compilation fails.
If you have I/O Standard assignments, the Fitter will arrange pins so that the standard can be implemented, and then it will tell you what supply voltage is required for each bank.
The &quot;(default)&quot; setting removes the I/O Standard assignment for the pin from the list of assignments in the project file, the Fitter will then apply the project-wide default to the pin. If you change the default, it will be applied to any pin that is currently set to the &quot;(default)&quot; setting.
You'd normally create I/O standard assignments first, compile, and then refine from the generated configuration. That's why there is a read-only column &quot;fitter location&quot;: this is what the fitter suggested, so if you start assigning pins but paint yourself into a corner, you can still see what it came up with.