jambient uses Microsoft's DirectX 7 DirectSound to generate 3d Sound. For details on their algorithms, see the Microsoft site.

Basically, DirectSound positions sounds in 3d space by simulating the differences in volume and relative arrival time between left and right sound signals.

It also takes into account the way that your head distorts sounds, thus producing differences between the signal at the left and right ears. Obviously, if you are listening through speakers, your head actually distorts sounds arriving from the speakers, but this doesn't happen if you are using headphones.

It is therefore crucial to tell DirectSound whether you are using speakers or headphones, and to tell DirectSound how your speakers are configured. Do this through the Audio tab of the MultiMedia control panel applet. In Windows 98, click the Advanced Properties panel. Presumably if someone is ever going to listen to your jam without headphones, you should set you speaker configuration to one of the non-headphone options.

Some soundcards have built in hardware for producing 3d effects. DirectX will do 3d processing in hardware if it detects such a card, otherwise it will do the calculations using your CPU, which incurs a performance hit. Make sure your DirectX driver is up to date.

Currently jambient only supports playback on two audio channels. When Microsoft releases DirectX 8, we plan to take advantage of new features that will allow jambient to support 3d rendering through quad channels. This means that you will be able to move sounds between front and back speakers. The  DirectX 8 will also take advantage of Creative Labs EAX standard, as will jambient.