The pinna (outer ear) distort the spectrum of sound entering the outer ear differently depending on the direction of the incident wave. It does this by attenuating the signal at some frequencies, and not at others.
Below is the sound of a bassoon, altered to give the impression that it is traveling around the listener. No reverberation is added to the first sample, yet an informal poll finds that most hear the bassoon begin in front of the listener (slightly to the right of front due to silence at the beginning of the sound file) and then travel behind the listener and around the left to front again.
Bassoon traveling circular pathThe Pinna's asymetry with respect to the axis through the ears provides different spectral filtering for each elevation angle. Thus, what phase information fails to reveal, the pinna make up for. However, there are limitations to the accuracy of such localization. The most important limitation is the spectral width of the percieved sound. A pure sinusoidal tone has a spectrum consisting of a single spike at its frequency. Thus, no spectral analysis can be made of this signal, and the pinna are ineffective in localization. Experiments have shown that for pure tones or signals with little frquency content, subjects are equally likely to percieve a signal as coming from an angle axialy symetric the angle of the ears (Yost 43). For example 140 degrees from front instead of 40 degrees from front in the horizontal plane. Another limitation is familiarity with the sound. The brain needs a spectral reference to compare the filtered signal to. Thus, familiar sounds and voices are more accurately localized than unfamiliar ones (Yost 44).