The stepped-back position of the outside observer is one place we can metaphorically locate the Soul, the Witness, and what Lakoff and Johnson call the Subject, i.e., individual consciousness. (A vertically oriented system, I imagine, is likely to place the eye of consciousness at forehead level or just above the head, within the body's aura.) The Subject is the locus of "subjective experience, moral judgment, reason, will, and most important, one's essence, that which makes a person who he or she is." (Philosophy in the Flesh, p. 563.)
I suggest that we sometimes think of our essence as “outside" (instead of in our heart, for example) because our essence is made up of the fundamental values, rules, laws and principles that we "stand for" beyond ("outside") everything else. These values, etc., are "larger than," "bigger than" the individuals in the room (i.e., the universe), who exist within the category to which they apply. They are therefore placed "outside space and time."
Alternatively, there is the concept of "Self in Presence" used in the body awareness practice called Focusing. This is the term used by Ann Weiser Cornell, my Focusing teacher. Presence is the sort of loving, nonjudgmental consciousness that can "be with" whatever is happening inside us, rather than being overwhelmed by it or exiling it.
In Focusing, sometimes these two extremes are described by the spatial terms "too close process" and "too distant process." In the first, one identifies with (or as) a problematic part of the self; in the second, one dissociates. Both of these processes make it harder for us to grow and develop, because we are stuck repeating a partial experience of our lives.
Once one has a clear idea of the whole spatial structure that I call MetaSelf — the meaningful structure that the body gives our lives — one can consciously move around within all of the space and try to imagine stepping outside it. In my experience, this overall sense of space and mobility brought a sense of agency or executive power in my life. Instead of feeling that I was clutching at miscellaneous metaphors like straws in a sea of confusion, I had a whole straw bale that I could hold onto like a life preserver.
From an outside position, one can observe and also project consciousness into places all along the front/back (z) axis, including various parts of oneself and of others. Thus, one can observe one's own feelings in one's body, or simply be "immersed in them." Also, one can be aware of the back of one's mind (our "shadow," hidden agendas, background issues, hopes, potentials, etc.), or simply be in its control. And one can examine the protective "front," mask or persona one has put up, or be consumed with pride or shame. In addition to all this, one has to take care to imagine or inquire about the corresponding spaces in the other person(s). This separation between the Subject and the other self or selves is fundamental to self-consciousness, and MetaSelf helps us diagram it and recognize that we can experience it.