AO stands for Ambient Occlusion. We know that IBL simulates Ambient light, but what is occlusion? Occlusion stems from the same root word as occult and means hidden or to hide. Ambient Occlusion is a fancy way of saying shadows, but remember they aren't real shadows. This is from a tutorial by KattMan that you can find on this website, http://www.ab3dp.com/ on the NG Extras page in the tutorials section. Its a nice little P6 lighting tutorial.