Binaural audio, in simple terms, is a method of recording sound with two microphones arranged in a way that results in an incredibly realistic, immersive 3D sensation, different from your typical Dolby Surround. All you need is a cheap pair of stereo headphones.
I'm baffled as to why sound designers have yet to incorporate this into their games seeing as how quickly and effortlessly the effect immerses the listener. It's almost cheating.
While Dolby Surround allows you to hear a bullet whiz passed your left ear, binaural audio improves upon this even further by allowing you to gauge the actual distance of that bullet pretty accurately, in inches almost.
Unfortunately this does not work with normal loudspeakers. I realize dedicated headphone users are in the minority, but I don't see why they can't add a simple "Binaural audio: On / Off" setting in the options menu, even if they just re-did some of the ambient background sounds such as wind, thunder, etc. I obviously don't expect every sound effect to be re-recorded using this method. The change in quality would immediately be apparent and appreciated even by non-audiophiles.
Not to mention combining this with Oculus Rift.
Youtube examples (use headphones):
Best example
Example #2
Classic example