Volume conduction of electrical potentials in the brain is highly influenced by the material properties and geometry of the tissue and recording devices implanted into the tissue. These effects are very large in EEG due to the volume conduction through the skull and scalp but are often neglected in intracranial electrophysiology. When considering penetrating electrodes deep in the brain, the assumption of an infinite and homogenous medium can be used when the sources are far enough from the brain surface and the electrodes to minimize the boundary effect. When the electrodes are recording from the brain's surface the effect of the boundary cannot be neglected, and the large surface area and commonly used insulating materials in surface electrode arrays may further increase the effect by altering the nature of the boundary in the immediate vicinity of the electrodes. This gives the experimenter some control over the spatial profiles of the potentials by appropriate design of the electrode arrays. We construct a simple three-layer model to describe the effect of material properties and geometry above the brain surface on the electric potentials and conduct empirical experiments to validate this model. A laminar electrode array is used to measure the effect of insulating and relatively conducting layers above the cortical surface by recording evoked potentials alternating between a dried surface and saline covering layer, respectively. Empirically, we find that an insulating boundary amplifies the potentials relative to conductive saline by about a factor of 4, and that the effect is not constrained to potentials that originate near the surface. The model is applied to predict the influence of array design and implantation procedure on the recording amplitude and spatial selectivity of the surface electrode arrays.