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A spotter is a member of the team that ‘spots' for the driver during a race. Usually stationed on top of the grandstands, they communicate with the driver via a radio and let them know when the green flag drops, where they are at in the field, if there are other cars on the outside, inside or behind them, when to slow for an accident and when pit road is opened or closed. Inside the cockpit of a racecar, the driver actually can't move all that much. Because of safety reasons, drivers are belted into their seats and side headrests won't allow them to move around much.
Spotters are essential in helping to driver know what's going on around them during a race. A great many spotters are former drivers who use their on track expertise to provide a wealth of information to the driver. If another driver seems to be going faster using a different line around the track for instance, they will relay this information to their driver.