5. Localization Cues

Our hearing system is designed to take advantage of the slight timing and volume differences between what reaches each ear. These processes are collectively called "localization cues."

Interaural Intensity Difference (IID) is the ability to determine where an object is based on the relative volume between your ears.

Interaural Time Difference (ITD) is the ability to locate based on the delay it takes to hit the second ear.

Your pinnae (the external part of your ear) also helps you with this. The pinna is essentially like a reflector dish, picking up sound waves over an area of several square inches and focusing them toward your ear drum. Depending on the direction a sound wave hits you pinnae, certain frequencies will be boosted or attenuated. Because of this, you can use EQ to make stuff sound like it moves behind you or around you in strange 3D ways.

Certain frequencies also echo off of your chest, somewhere around 500Hz-1000Hz if I remember right.

You can look up the frequencies, search Pinnae Response or Localization Cues.