I first heard the DTS surround sound from stereo demo at this year’s Mobile World Congress in Barcelona. The technology is called Headphone X. It was astonishing. You went into the Qualcomm Snapdragon 800 theatre – it was in association with Qualcomm become some DTS technology is baked into the latest Snapdragon chipset – sat in a plush armchair, and donned stereo headphones.

The next thing you knew, sound was coming from front left. Then front right. Then rear left. The illusion was amazing, and I was not the only one who removed their headphones temporarily to check that they really were the sole source of the sound.

I interviewed the DTS folk about the technology, and also spoke to the guys at Dolby. Nothing new, said the Dolby folk, we’ve had virtual surround sound for years. Yet, the demo at the Dolby stand fell far short of what DTS was showing.

Now you can try it, if you have an Android or iOS device. Download the Z+ app and listen to the demo.

I tried this on someone today, and his “Wow!” reaction showed that the demo is still astonishing. You know it is an illusion, but it sounds as if you are seated in the middle of a room with five or more speakers.

If DTS has proved that surround sound from stereo is possible, what are the implications? Surround sound has not failed exactly, but its inconvenience has limited take-up. Many surround mixes of music albums are now hard to find, because they were made for long out of print SACD or DVD-Audio releases. What if you could easily download all these mixes and enjoy them with stereo headphones or earbuds?

An enticing thought, but there are caveats. The Z+ app, for example, is disappointing once you get beyond the demo. The only album it plays is the Hans Zimmer soundtrack to the Superman film, Man of Steel. One track is included for free, and the others are in-app purchases. It sounds good, but the surround effect is less convincing than it is in the demo. I heard better music demos in Barcelona. I also get superior sound on the iPhone than on the iPad (it is an iPhone app), though I might be imagining it, and in both cases I get occasional stuttering, though that may be because I am not testing on the latest generation Apple hardware.

An app that only plays one album is not a revolution in sound, and if this is to go mainstream, DTS needs to sell its technology to one of the major music download or streaming services and have it built-in to the client app. It has made a start, with its Qualcomm deal which is meant to be in shipping chipsets from “the second half of 2013” according to the information in Barcelona. My guess is that any problems with stuttering will be removed when there is hardware support.

How does it work? The DTS guys told that it “it’s psychoacoustics. You’re triggering the brain with responses that induce it to say, this is from here. It’s a combination of timing and frequency. That’s traditional virtualisation.” After that, they explained, they apply room acoustics that take the illusion to another level. This could be the room acoustic of the studio, achieving a holy grail for audio engineers, or that of the listener’s own room or a concert hall, for example. The room acoustic can be user-selectable, though this is not a feature of the current Z+ app.

There is a caveat that might upset hi-fi enthusiasts. Think about it. Virtual surround sound is delivered in stereo, which seems impossible, but then again we only have two ears. Our ears are designed to hear sounds more clearly if they are in front of us. Therefore, to simulate a sound coming from behind you, do you need to make it less clear?

I put this point to a guy from DTS, that parts of the music are in a sense deliberately distorted or muffled. “That occurs naturally by our head,” I was told. So is the fidelity of the sound reduced in order to achieve the surround illusion? “No differently than speakers in a surround system would do anyway,” he said.

Another caveat is that, by design, the system only works with headphones. Of course, if you have a full surround system in your room, you can play surround mixes in the normal way, turning to the DTS technology only for headphone listening. Headphones are also unable to recreate the effect of a sub-woofer which you can feel in your chest. “It’s a physical element. We’re not going to be able to replicate it,” said DTS.

Headphones are unbeatable though if you want to recreate the acoustic of a different room, such as the studio where the music was mixed. Further, for a mass market, delivering surround sound through a mobile device and standard earphones is the right approach.

The Z+ app is disappointing, but I would nevertheless encourage anyone with an interest in audio technology to download it and try the demo. Headphone X has huge potential and I shall follow its progress with interest.