I thought I'd look that up and found
this scan of the Sonic CD manual which shows the page. Pretty nifty! Wrong speaker hookup or placement, volume imbalance, and having your head in the wrong place all can make the effect useless. You might think, "That's too complicated, I'll just wear headphones!" Unfortunately then for you, it cannot work with headphones because the sound waves are separated from each other and so the phase cancellations necessary to create the illusion are impossible.
As a disclaimer, I haven't actually seen any official explanation from QSound as to how their process works so I may be wrong about something, but with my background audio knowledge, some reading of secondary sources, and from some study of some music with QSound, I'm fairly confident I'm not lying to anybody here.