It's a parameter for materials, and the name seems straightforward enough, but I don't see how it differs from just baking AO into the base texture and/or phong map. Has anyone experimented enough with this to know? The only guess I can come up with is that it either works in conjunction with the light angle similar to how $ssbump does, or it applies the black on top of the phong shading instead of under the way AO bake would, producing a slightly more realistic shadow. Or both.