The aim of most attempts to synthesize a virtual auditory environment is duplication of the acoustical features of a real auditory environment. In other words, the sound pressure waveforms reaching a listener’s eardrums in the virtual world should be the same as they would have been in a real world. This goal is currently reachable only in certain laboratory conditions. Thus, production of usable virtual sound systems involves a number of compromises. For example, error-free synthesis of an auditory object at an arbitrary point in space requires knowledge of the free-field-to-eardrum transfer functions (HRTFs) for both ears at all sound incidence angles. Since it is impossible to measure HRTFs at all sound incidence angles, some interpolation is required, and how best to accomplish it is a difficult question. In addition, HRTFs vary considerably from listener to listener, but it is not feasible to measure HRTFs from each potential use of a virtual sound system. Either a single HRTF must be chosen or some kind of average HRTF computed. Interpolation and use of nonindividualized HRTFs are two of the many compromises that must be made in order to produce a usable virtual sound system. These compromises produce error, the significance of which can only be assessed in psychophysical experiments. The experiments described here require listeners to judge the apparent positions of virtual auditory objects that are synthesized so that the error introduced by interpolation and other compromises is systematically manipulated. The perceptual consequences of the manipulations are evaluated by examining the variance in apparent position judgments, the discrepancy between apparent position and intended position, and the frequency of front-back and up-down confusions. [Work supported by NIH and NASA.]