Red is positive Blue is negative sorry bout the crap drawing hopefully this helps
That circuit is far to simplistic to do the job, and will let the smoke out any time you turn the pot all the way down.
Your pot is just a resistor that varies from 0 to 500 ohms. Now, when it's at 500 ohms, things will behave kind of sensibly: Some current will go through the pot, while the rest will go through the fan. The fan will spin. As you turn down the pot, more current will go through it, bypassing the fan. When it gets to 0 ohms, it'll short out the power completely.
Now, if you put everything in series (so the power, switch, pot and fan form a "loop"), things will behave slightly better, but it's still not what you want. All the current will flow all the way around the loop every time you turn the power on. At 0 ohms, there will be no voltage drop across the pot, so the fan will get "full power". As you turn the pot up, the resistance will rise, and you'll get a voltage drop across the pot, and power will be taken away from the fan. That's the opposite of what you want, and 500 ohms will never take enough power to completely stop the fan.
There's a good control circuit at
http://brewiki.org/StirPlate. It's a little hard to describe how it works, because it uses a semiconductor to regulate the voltage that the fan will receive. If you follow it though, it'll work.
Edit: Beaten to it by LethalCorpse. His circuit is simpler than what I linked to, and will do the job fine.
If you don't understand it, get a friend with a better understanding of electronics to throw it together for you.