STS Controller described an unauthorized runway entry; surmising the traffic information issued to an aircraft on downwind may have been interpreted as a clearance onto the runway by the pilot in question.

Narrative

I was training on Local Control. Multiple aircraft were in right traffic to Runway 14. Aircraft X called up from the run-up area of Runway 14 ready for departure. I instructed him to hold short of Runway 14 for landing traffic. Aircraft X read back the hold short instructions. After another aircraft landed; I planned to make a hole within which to launch Aircraft X. I instructed Aircraft Y on the downwind; next in sequence to land; to continue on the downwind and quoted him traffic; Aircraft X; would be in position ahead of his arrival. At this time; Aircraft X proceeded to cross the hold short bars to taxi up onto the runway. This was done without clearance from myself or my instructor for Aircraft X to 'Line Up and Wait.' I immediately noticed Aircraft X moving into position; and issued the clearance for takeoff; as the previously landed traffic had already cleared the runway. No loss of separation occurred; and after takeoff roll; Aircraft X was requested to contact the tower at his convenience. It is my belief that when Aircraft X heard the 'traffic will be in position' quoted to Aircraft Y on the downwind; the pilot mistook this as a clearance to 'Line Up and Wait;' even though the words 'Line Up and Wait' were never used in the traffic quote. Recommendation; the pilot of Aircraft X needs to more clearly listen to what is being said; and to whom. Also; issuance of 'traffic in position' prior to actually telling the aircraft in question to 'Line Up and Wait;' could have lead to the pilot's misunderstanding; and it maybe better to only issue such traffic calls after the 'Line Up and Wait' clearance has been given.