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Vipassana does not involve concentrating solely on the breath. Instead (one form of) it involves resting your attention on the breath. While keeping your attention on your breath your awareness naturally has to be open to unconsciously "decide" whether or not the attention should change to something else, so already it is naturally open in this situation. By placing your attention on your chosen object of meditation you are implicitly opening your awareness.
At first it's not obvious: you may feel that you are really forcing your attention onto your breath at the expense of other sensations, but as you relax and open further you will begin to perceive your awareness with much more clarity.
Source: The Mind Illuminated
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Aren't these two mutually exclusive?
No. When the breath is known within the body, simultaneously sensations within the body will be felt. Also, the impermanence of the breath will be experienced.
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If you simply observe everything, eventually, the mind starts wandering.
So, observation of the breath in vipassana serves a few functions:
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When you watch your breath, seeing the quality or character of each in-breath and out-breath allows you to really see your feelings (not sensations, that's a bad translation). Breath is the best pointer at your emotional state.