From TDN

A rough over view

Determine the visible/not visible state of all units in the mission based on friendly unit locations and visibility ranges construct a list of all visible units per client scope the entire list of visible units to that client

By using this method AI can be given true client side game state awareness. Depinding on the game the use of scoping is the first step to making an AI function as a real player would. Nothing is quite so anoying as a bad guy who always falls for traps or one that never falls for traps.