They are listening to each other. Most of the instruments are mic’d in isolatiom so that the engineer can later mix each track individually which means that the band needs headphones to be able to clearly listen to what each other is playing. Aside from that you need headphones for instruments that dont require mic’s and are connected directly to the mixer. You also need headphones to listen to the engineer in the booth talking and giving instructions while the band is in the main room/booths. You might also need headphones for playback if you are overdubbing and for click track (metronome) if you record with it.
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