This article is from the Bicycles FAQ, by Mike Iglesias with numerous contributions by others.
It is often said that putting the outside pedal down in a curve
improves cornering. Although most experienced riders do this, it is
not because it has anything to do with traction. The reason is that
it enables the rider to unload the saddle while standing with little
effort on a locked knee, cushioning his weight on his ankle. This can
only be done on the outside pedal because the inside pedal would hit
the road. However, standing on one extended leg does not work on
rougher roads, because the ankle cannot absorb large road bumps nor
raise the rider high enough from the saddle to avoid getting bounced.
Rough roads require rising high enough from the saddle to avoid hard
contact while the legs supply shock absorbing knee action, with pedals
and cranks horizontal.