When this dipole moment is placed in an external magnetic field along the Z-direction, it experiences a torque which can be expressed as
The potential energy

For a static magnetic moment, this torque tends to line up the magnetic moment with the magnetic field B, so that it reaches its lowest energy configuration.

Here, the magnetic moment arises from the motion of an electron in orbit around a nucleus and the magnetic moment is proportional to the angular momentum of the electron.

The torque exerted then produces a change in angular momentum. This change is perpendicular to that angular momentum, causing the magnetic moment to precess around the direction of the magnetic field rather than settle down in the direction of the magnetic field.

This precession is known as Larmor precession.