The correct explanation for why sounds from headphone earpieces seem very loud to the listener but are much quieter to a person standing a meter away is:
The amplitude of the waves decreases as the sound spreads out and is absorbed by air.
When sound is produced by headphones, it is directed primarily into the ear canal of the listener. As sound waves travel away from the source, they spread out, causing the amplitude (or intensity) of the sound to decrease. Additionally, sound can also be absorbed by the environment (such as air), further reducing its intensity as it travels. This is why a person standing nearby may not be able to hear those sounds as loudly as the person wearing the headphones does.