Hola A

It could be any of those situations. So, we sometimes use "ese, esa, esos, esas and neutral eso" simply to refer to something that is far from the speaker at what is considered a medium distance, without having in mind the distance for other people around. Now, a medium distance is something that can be very subjective of course, but we mean something that is generally out of reach, however, not that far away so you can hardly see it. 

The other scenario when you use "ese, esa, esos, esas and neutral eso" is when you have two interlocutors and then one points out at something that is very close to the other interlocutor, but not close to the person who is speaking. 

Either of these two scenarios are the ones when we use ese and all its forms. These two scenarios are different, so it is one or the other happening. 

I hope this clarified it.

Saludos cordiales

Inma