From LucasArts Entertainment:
In addition to some minor mission updates, the X-Wing Alliance Patch version 2.02 includes further enhancements to 3D sound support and is compatible with all foreign language versions. Aureal A3D Interactive Sound support provides hardware-accelerated 3D positional audio. To enable this support, go to the Sound Options menu and select 'On'. If you have an Aureal-supported sound card, it will default to A3D support. LucasArts had made adjustments to their sound system to create a more fulfilling experience for users with Direct Sound 3D supported sound cards.