Observations of high-redshift Ly- \alpha sources are a major tool for studying the high-redshift Universe and are one of the most promising ways to constrain the later stages of reionization . The understanding and interpretation of the data is far from straightforward , however . We discuss the effect of the reionizing intergalactic medium on the observability of Ly- \alpha sources based on large simulations of early structure formation with radiative transfer . This takes into account self-consistently the reionization history , density , velocity and ionization structures and nonlinear source clustering . We find that all fields are highly anisotropic and as a consequence there are very large variations in opacity among the different lines-of-sight . The velocity effects , from both infall and source peculiar velocity are most important for the luminous sources , affecting the line profile and depressing the bright end of the luminosity function . The line profiles are generally asymmetric and the line centers of the luminous sources are always absorbed due to the high density of the local IGM . For both luminous and average sources the damping wing effects are of similar magnitude and remain significant until fairly late , when the IGM is ionized between 30 % and 70 % by mass . The ionizing flux in the ionized patch surrounding a high density peak is generally strongly dominated , particularly at late times , by the cluster of faint sources , rather than the central massive galaxy . Our results reproduce well the observed mean opacity of the IGM at z \sim 6 . The IGM absorption does not change appreciably the correlation function of sources at high redshift . Our derived luminosity function assuming constant mass-to-light ratio provides an excellent match to the shape of the observed luminosity function at z = 6.6 with faint-end slope of \alpha = -1.5 . The resulting mass-to-light ratio implies that the majority of sources responsible for reionization are too faint to be observed by the current surveys .