Ambient Occlusion is a more sophisticated ambient trick, which takes nearby faces into account by firing a hemisphere of shadow-rays around. AKA 'dirt shader'. There are some changes compared to the original patch as provided by Eeshlo:

• The settings are in the World menu, and the Material->ambient value controls the amount it contributes.
• Currently, the AO value is added/subtracted/mixed with the 'diffuse' factor while shading, before it is multiplied with Material color

Buttons are in new Panel 'Amb Occ" in F8 menu. Note:

• "Dist:" by shortening the length of rays you get subtler effects and it renders faster too
• "Use Distances:" the attennuation factor gives control over how the 'shadow' spreads out.
• "Sky Color" allow a colored blending for AO, the horizon color is for the lower half, the zenith color for the top.
• "Sky Texture" this performs a full render of sky color to be used as AO diffuse light. Also note the new "AngMap" option in the texture channel for sky. This allows usage of socalled Spherical Light Probe images.
• "Energy:" a scaling amount to control how much it contributes to 'diffuse'

Further it's just raytracing, so tends to be slow.

Here same tricks as for other raytraced scenes apply, especially try to keep the environment as small as possible (exclude faces from Octree by giving them no Material Traceable).

Credits: Eeshlo (Alfredo de Greef) provided the first patch, integration and imrovements: Ton Roosendaal.