A binaural recording setup uses an artificial head with artificial ears, with the microphone capsules located where the eardrum would be. The microphones capture the phase and magnitude effects of the head and outer ear. Unless you have really weird ears or really bad headphones, the effect is extraordinarily lifelike.

https://en.wikipedia.org/wiki/Binaural_recording

https://www.youtube.com/watch?v=kTkVnb3TXO8

It's also possible to process sounds digitally to create a binaural effect using convolution. Using a mathematical model of the ear and head (a head-related transfer function), you can position sounds in a 3D space around the listener. Many games offer HRTF audio and it provides remarkably accurate spatial information. HRTF audio is a key aspect of the immersiveness of VR experiences. It's possible to generate a unique HRTF based on your own anatomy, using either an audio capture from a microphone placed inside the ear or a 3D scan of the user's head.

https://en.wikipedia.org/wiki/Head-related_transfer_function

https://www.youtube.com/watch?v=_dxIK3-vqpc

https://www.youtube.com/watch?v=cMDVJWExcxY

It can also use a real head with real ears and e.g. the Roland CS-10EM binaural headphones (which I've had reasonable success with.)

That's pretty darned spatial through headphones (recorded with Roland CS-10EM binaural microphones.)

I recorded my home, an afternoon with the family from the speakers that it would be played back from. After some fiddling with a pre amp to get the recording balanced well enough to play back, the effect was pretty effective.

I didn't expect it, but when that recording was played on that system and speakers, it was possible to sit in my room and basically hear the house! TV in the front room, dog walking around, doors closing.

Brought people in late at night to play it. Was spooky to hear midday sounds, and believe them. The illusion was that good.

Those needs specialized equipment to be recorded -- and can indeed reproduce the 3d spatiality of the sound (sic).

In fact there are 3d sound processors that can do very impressive things even without headphones (e.g. some from Roland).

1) The inter-aural time difference. Sound takes time to travel, so any sound coming from left of the head will arrive at the left ear sooner than the right ear.

2) The head-related transfer function. The shape and auditory characteristics of the head and ear canal change the sound slightly depending on the frequency and the direction of the incoming sound. Since this direction is different for the two ears, your auditory system can compare the 'shape' of the sound it gets from each ear and use that to position the sound in space.

The inter-aural time difference is, by far, the more effective of the two, but it only gives horizontal bearing. It also can't give 'in front' or 'behind'. The head-related transfer function can give both horizontal and vertical bearing, but it's not that accurate. Together, these explain why humans are far more accurate at localizing sounds horizontally than vertically.

Binaural recordings try to capture both of these mechanisms through stereo recording with a mock head. That's why listening to a binaural recording gives you the feeling of sounds coming from a point in space, because it's replicating the same experience you'd get from actually being in that space.

Any chance at a soundcloud link?

Two channels.