In the study of audio engineering/mixing and psychoacoustics, the stereo image that is created by two correctly positioned monitors is already “3D,” and most mix engineers understand how to place a sound source at various distances in relation to the listener by manipulating reverberation, timbrel detail, and amplitude level. This is no different with Surround Sound except that the listener is inside of the sound field rather than a spectator receiving sound queues from loudspeakers only in the front.
What Edgar Choueiri, the professor of mechanical and aerospace engineering at Princeton University, is actually doing is trying to make the 3D phantom image more detailed (less blurred and smudged by crosstalk), and in some cases, as with the “fly” example, he replicates a surround sound environment. Unfortunately, the video does not attempt to explain much of the science behind crosstalk cancellation. This is because the science is difficult… However, the basic idea is that through analysis of how each ear receives crosstalk, audio filters are implemented to create artificial crosstalk in order to cancel out the real thing. From what I’ve read, there are various methods for creating these filters but the basic idea still holds.
The one problem with this type of recording is that it is essentially an illusion that attempts to make loudspeakers into headphones by restricting the right ear to hear only what is coming from the right speaker (same for left). What you’ll notice when listening to the examples from the video (on actual monitors instead of laptop speakers) is that it feels like there is a wall in the center of your face and this can be slightly disconcerting. It makes it slightly restrictive for creative applications, as well (especially when considering miking techniques). In reality, sound sources don’t choose to affect only one ear, so crosstalk cancellation is an unnatural illusion that actually, in my opinion, draws unnecessary attention to the loudspeakers rather than the material coming from them.
Though, it is such a new technique that it may take some time to get used to as it starts to enter the mainstream.