You need to have spatialization on in order for the waterfall sound to sound like it is originating from the waterfall (localized in the world). Attenuation needs to also be on so that when you move away from it, the volume will decrease naturally. You need to set the radius (where you hear at full volume) and falloff distance (the distance at which the sound will fade out) so that you can hear it from a proper distance. If you turn off attenuation, when you move away from the source of the sound it will be at full volume, then zero volume once you cross the threshold and will sound unnatural. In the picture, the settings are 500 for radius (full volume, about 16 feet or 5 meters), and 1500 falloff (the sound will fade out over the next 49 feet or 15 meters)
