Lateralization is just what it's called when using headphones and binaural sound without any form of "spatial" treatment applied to it. it's different in many ways from your everyday hearing and placing of sound sources around you, and as a result, the same initial signal will arrive and be interpreted differently. One expected result is to feel as if the sound comes from inside our head or close by.
About your example, we're not very good with distances, so that's not surprising. we're also not great with elevation(because of where our ears are placed). Which is why a typical album mostly focuses on panning left and right on the horizontal axis between the speakers. Elevation is mainly perceived thanks to changes in the frequency response, and for mono it's pretty much all about FR and vision. so when you read a review about how good the IEM's soundstage and imaging is because on song X, instrument Y felt as if it was high up on the right. Well that's most definitely not where the sound engineer tried to place that instrument on the stereo album^_^. But I can't argue that the effect can be fun when it happens. I only hate any false feeling of height in front of me.
If you really want learn about how human locate sounds, I can give you a bunch of links on psychoacoustics, but the main idea here is to understand that hearing a cat outside is different from hearing music on a pair of speakers. And both are different from listening to headphones(at least the traditional way).
One of several issues with headphones is how our libraries are filled with music made for speakers. I mostly have stuff from the 80s and before, so those are very much not taking headphone playback into account.
Another big issue is that we objectively need some amount customization for headphones, while we don't for speakers or to perceive the cat asking to be let in just so it can go out again. And while speakers are a different playback method where one instrument comes from 2 places(the 2 speakers) instead of a single place in space, the way the sounds reach our body and are altered by it, is still very much like everyday life hearing of sounds around us. Like with the cat. So we're calibrated for that, it's what's "real".
With headphones, and typical stereo albums, things are messy and wrong. so how we interpret them is also wrong and placement in particular really takes a hit.
But to be clear, headphones on their own have consistently better fidelity than speakers. it's not a matter of headphones lacking sound "quality", it's just something being misused.
@sander99 took care of the A16 question I imagine. there is a fairly active thread with too many posts where you can ask any question. and given how most current users were so very lost at first, you can be sure that nobody will criticize you for asking newbie questions. some devices give the owners a big head, not the A16! it enforced humility and solidarity on most users
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