It is sometimes useful to have git tracking files stored in a different location from your working directory, for instance if you would like to backup the git files, and your working directory contains files which are much too large to back up. This could be accomplished by using symlinks, however this is a fairly fragile solution. A more robust solution is that given in this stackoverflow post.
If you already have a git repository you would like to store outside the working directory, say /path/to/repo.git and you are in the working directory
mv .git /path/to/repo.git
echo "gitdir: /path/to/repo.git" > .git
git config --add worktree `pwd -P`
This will move the .git folder to the new location, create a .git file pointing to the new location, and update the git configuration to point to the current working directory. Everything will then work exactly as it did before
If you are initializing a new empty repository you can do everything on one line
git --git-dir=/path/to/repo.git --work.tree=`pwd -P` init && \
echo "gitdir: /path/to/repo.git" > .git
This is a very useful tip for keeping track of all of your repositories, and also allows easy backup, as you can just mirror the folder which contains all of them.