When we hear a sound our brain compares the sound waves going into each ear. A sound from the left will obviously reach the left ear before it reaches the right. The brain recognises the sound is the same but that the time it reaches each ear is different and therefore it is able to tell us where the sound is coming from. A recording technique known as binaural recording enables us to capture sounds as our ears hear them and therefore enables our brain to place the sounds spatially, telling us where the sound is coming from. Recording music using a binaural set up can sometimes help the listener feel as if they are actually at the recording. The example below is a recording of a steam train. Close your eyes and listen on headphones and the train will pass in front of your eyes!
