Bullying has an effect on all children who experience it in their environment, and not just the ones who are being targeted at the moment. Bullying also has a negative impact on the children who witness it, and this damage can come about in a variety of ways:
1. Bystanders to bullying are harmed through vicarious injury
Seeing another child being bullied may trigger personal insecurities in the children who witness it, and so even though they are not the one being targeted, the verbal/emotional abuse might hit upon a sensitive issue and leave them coming away feeling almost as bad as the child being bullied. This is one of the most commonly overlooked aspects of bullying, yet it's as potentially damaging as the direct effects, because it has the potential to impact a much larger audience.
For example, Girl A witnesses Girl B being bullied for being a "fat pig." Girl A may not be the bullies’ target, and isn't as overweight as Girl B, but she nonetheless could stand to lose a few pounds herself and is insecure about her weight. So every time she overhears Girl B being harassed about being fat, it strikes a nerve deep down in her own psyche, though she pretends not to take notice.
Or let's say Boy A is relentlessly called gay and bullied about being a "queer." Boy A isn't actually gay, he's just small and doesn't like sports and seems a little bit "off" to the kids who bully him, and thus he's been assigned the label. But while this heterosexual youth is being gay-bashed, his classmates, one or two in every class who actually are (secretly) gay, or others who may have bisexual tendencies and sometimes struggle with homosexual feelings, are stung by every cutting remark. Yet this vicarious injury extends even further. You see, sexuality is much more diverse and colorful than we pretend. Though not possessing a same-sex orientation, studies show that anywhere from around a quarter to half of all adolescents will nonetheless have a same-sex sexual encounter, either out of curiosity or experimentation or simply because that's what circumstances made available at some point in time. So these children can also feel mental anguish when they hear a classmate go on a tirade about how sick, sinful and evil such acts are, or about how all queers should be dragged into the street and shot. If you were to extend this to those kids who might have had same-sex crushes or fantasies, the list of those potentially affected grows larger still.
It's in this way that bullying is a master at breeding shame and insecurity in ALL kids. No matter what subject a bully decides to attack, inevitably there are other children around witnessing this torment who are personally injured by this taunting, because it will strike upon a trait or experience that is personal to them. Witnesses to bullying may not be the targets themselves, but they can nonetheless come away from the situation feeling anguished and insecure.
2. Witnesses can feel guilt or shame for not intervening
Many kids - especially those with high levels of empathy and moral character - will feel bad for not standing up for the bullied child after witnessing an incident of bullying. There are numerous reasons to keep quiet: fear of having the group turn on you and being targeted yourself, wanting to maintain a friendship with the person doing the bullying, or not feeling you have the social clout to intervene. Whatever the reason, those who see it as wrong but don't intervene can feel guilty or cowardly later on for not having done so.