When reading a physical book, the natural thing to do is to scribble in the margins, next to the relevant passages. Or maybe to attach a sticky note at the relevant spot. But for whatever reason, digital reading environments almost never support this kind of interaction. Annotations are hidden away under some icon of a sticky note, or in a “notebook” which displays them in a flat list, de-spatialized and disconnected from the content.
LiquidText and MarginNote are the only exceptions which come to mind. Note that neither supports EPUB! All desktop EPUB readers are awful More recently, Readwise Reader has added marginal notes. And they support EPUB—a rarity. Unfortunately, the PDF support is quite clunky.
Google Docs has already pinned down a more-or-less fine UX here; I do wish others would simply copy it.
Hypothes.is offers a halfway solution, providing some spatialized indexes by way of edge marks in the gutter of its sidebar. But the annotations themselves are presented in a flat list; the edge marks just apply a filter. You still can’t scroll through a document and read the annotations alongside it, as Ted Nelson had depicted in 1972 (!).
Note that the location doesn’t need to be that physically precise. It’s just in the general vicinity. Digital annotation is too formal.
SpaceInk has a nice interaction for making space for annotations.