Officially it goes....
MAYDAY = AN AIRCRAFT IN GRAVE AND IMMEDIATE DANGER
PAN PAN = AN AIRCRAFT WITH DIFFICULTY NOT IN IMMEDIATE DANGER
However, I think its generally accepted these days that if theres any doubt then call a MAYDAY as there has been issues/accidents due to crews reluctance to call for a full emergency for what seemed like a fairly easy problem to solve.
Probably wasnt a big deal but well done to the crew for speaking up and not pissing about (besides, its probably in the QRH to call for a MAYDAY for smoke on the flightdeck).
