It actually also works because a sound registers differently based on the direction it travels through your own head (i.e. your skull itself is an occlusion source) - your brain recognizes front vs. back based on how your own head dulls the sound
I assume the shape of our ears also affects the sounds, depending on the location of the sound. This converts vertical location into frequency shaping.
And I wonder, why else would we have such oddly shaped ears?
You would be correct. The shaping of the pinna (and resulting sound reflections) help us determine the height of sound sources, even if they're right on our midline.
