Binaural rendering produces a two-channel signal specifically for headphones, designed to recreate the directional cues a listener would experience from real sources in space. It works by filtering each virtual sound through the HRTFs for its direction, so the brain hears the time, level, and spectral differences that say 'this is above me and to the left'. Done well, sources seem to exist around and outside the head — externalization — rather than stuck between the ears as ordinary stereo does. It is how object and scene-based formats (Dolby Atmos, Ambisonics) collapse to earbuds, and adding head tracking, so the scene stays fixed as you turn, makes the illusion markedly more convincing.
