Binaural cues play a fundamental role in lateral localization. By sampling the acoustic signal with both ears, the auditory system exploits the differences in the captured signal to determine the location of the auditory event in the horizontal plane. These differences are divided into two categories: interaural time differences and interaural level differences.
Interaural time difference (ITD) is the difference in the arrival time of an acoustic signal to each ear. The ITD is highly frequency-dependent, with a limited range up to approximately 1,500 Hz. This phenomenon is due to the absolute refractory period of the auditory neurons. When the period of the acoustic signal is less than the refractory period, the auditory system is no longer able to calculate the ITD related to the fine structure of the signal. Instead, the listener compensates utilizing the temporal envelope of the stimuli.
Interaural level difference (ILD) describes the attenuation between the ipsilateral and contralateral ear. The listener’s head causes an acoustic shadow for stimuli having wavelengths less than the dimension of the head. This is of course prevalent with higher frequency; however, when the wavelength is greater than the width of the head, the wave diffracts around the head, yielding a negligible level difference in the ears.

Examples of binaural cues - left and right ear
Figure 1. Examples of binaural cues where LEFT is the left ear and RIGHT is the right ear. (Left) Interaural level difference between the left and right ear. Grey section marks the difference in level between the ears. (Right) Interaural level difference between the left and right ear. The signal at the left ear is delayed by \Delta t