If you play audio on your phone while wearing Airpods, and you turn your head, it still sounds as though the audio is coming from the direction of your phone.

Traditionally, it's not about the phone, the technology is meant to provide the effects one hears with the complicated 5+1 speakers and similar setups (typically today called "home cinema" etc), where you can "hear" the effect or the music appear from different directions (e.g. behind your back, right and in front of you left, or even the steps moving across the room). The effect can be heard when you're in the center position between many speakers and the content is produced for that. But, if you move your head while wearing the headphones (which should help you figure out where the sound comes from) the change that gives you the idea "where something is" won't be heard if the headphones aren't able to "know" that you moved your head at that moment and adjust the sounds accordingly. For adjustments, typically a lot of computation is needed. In VR or AR the same effect could give you a direction information of everything virtual around you. The virtual door on the right of you scratches, and as you approach it you hear the noises louder, as you turn your head, the noises are obviously from behind the virtual door... etc.

Edit: to answer the "stereo" question: so it's about the audio mixed in more than 2 channels, or VR and the like effects.

Isn't audio already recorded in stereo? What is the need for re-mixing it again on the fly? Why muck with the artist's intentions?

So movies, for instance, are recorded in 5 or even seven channels. You want the front channels to sound like they're coming from the phone, and the back channels to come from the opposite direction of the phone, etc.

I don't know if Apple's tech also activates for stereo audio.

From the direction of your phone? Like if you left your phone on the counter and you're walking around the kitchen the headphones attempt to make it sound like audio is coming from your counter?