Hi! The ambient occlusion feature in blender cycles rendering. Basically as we understand it lightens everything. What value would be reallistic? How does it do it? When is it good to turn it on? What does the distance do? Thank you! Please post any kind of tests here.
Did you see the Blender wiki entry about that feature? That should get the basics covered.
Since Ambient Occlusion is a fake, you will get the most physically correct result with not using it at all.
Another problem with Ambient Occlusion is that it takes any particular point and figures out how occluded this point is by other geometry around it - regardless of the object’s materials. So, a glass plane would also occlude any objects close to it, which is not realistic at all.
Often in scenes I find AO reallistic, just in a certain factor. I’ve read the wiki entry and wikipedia overal entry.
As far as photorealistic AO as opposed to AO you see all the time, I don’t think you can get that in blender unless you do passes. There’s a great Maya tutorial about correct Ambient occlusion and how to layer it in post. I can’t find it now but if I come across it I’ll post it. It should be on youtube.
When is it good to turn it on?
All the time. Works great for product shots. Lighting is the last thing you want to add to your scene.
AO (in any renderer) is good in many cases because it is cheap(er than other alternatives), and often, as my uncle used to quip, “good enough for peace work.”
In a lot of practical cases, it will improve your shot visibly, with an acceptably small cost. If your scene is “problematic,” e.g. using things (like glass) that run against the assumptions made by the AO algorithm, you’ll have to use another brainstorm to get the shot done. But a lot of scenes out there, which need lighting improvement, aren’t “problematic” to AO. Like all the tricks in your trick-box, it has its time and its place.
Well… I’d say: Never. 
Now you got a problem… Who’s right?
If AO makes your image look better - use it. When it doesn’t - don’t use it.
What is better? I don’t know. It’s your image. You know best.
AO is fake, but who cares? If you want to be “physically correct” - turn it off. If you don’t care about physics - simply see what you like more.
Thank you all for the replies, I’d love to see maya tutorial on this.
To be fair, there is a correct way to add in ambient occlusion and an incorrect way. I find the “correct” way still to be pleasing to the eye.
I found that Maya tutorial but this is the simplest way to explain Ambient Occlusion and why you never just “multiply” it over the entire image.
How to use Ambient Occlusion correctly
Explanation page of what Ambient Occlusion is/should be
The real question is, does Blender’s Environment tab and Ambient Occlusion setting natively do this or just multiply over the entire image, which is wrong?
Never is super harsh. GPUs are getting faster but for complex scenes AO is the better deal because it is faster. You can set mediocre settings for noisy shadows and really get that feeling of weight with AO without busting up your render times. When you are on a deadline, “Never” is not a good answer lol. 
Bullotsky, thanks the article was nice, but.it’s much more for 3ds max or the history of CG.
This seems pretty strightforward even for noob like me. Thanks for posting this link!
E: Ikari has good point, the description of AO psyhically incorrection should be mentioned at wiki.
From the wiki page IkariShinji pointed out:
Lighting from ambient occlusion is only applied to diffuse reflection BSDFs; glossy or transmission BSDFs are not affected. Transparency of surfaces will be taken into account, i.e. a half-transparent surface will only half occlude.
From how i understand this there should not be a problem of glass shadowing itself or other objects near by.
So, I stand corrected, then!
EDIT
No, I don’t…
AO in Blender takes transparency into account, but seemingly not refraction. So the glass plane occludes the cube just like a diffuse plane does.
Thanks for a great example!
One more proof that reading is a bad habit…
Maybe not, you never know.
Btw is it Cycles or BI?
Edit: I know, the last was stupid but i just can’t get that shadow…
I did try Mix and Add. One is Glass another Glossy/Transp.
Here’s my .blend file (2.70 x64): Download
Not sure what you mean with “Mix” and “Add”… I thought we were talking about Cycles’ “built in” AO settings?
And BTW, the lighting in my scene is pure AO, no light sources - to see the effect more clearly.
Well glass drops a shadow actually, of course it’s really not that much noticeable but still.
Thanks!
As i thought that does not happen with Glossy/Transparent mix.
I was using AO node in material mix before expecting AO per material btw.
