It's a question of bang for the buck. Because it really slows things down, if you put it everywhere, even if nothing is nearby, it still is expensive for it to figure out that nothing is nearby, and therefore there's no reason to darken the object.

So you should look around at things that are near each other and ask yourself if you need a contact shadow there. A hand always needs it for realism on the skin, because the fingers are close together. But a naked back doesn't need it if there's nothing nearby. So you'd put AO on the hand but not on the torso, if the pose was right.

Another thing you'd not bother with is if you had a wall behind your figure and nothing near it. It's a huge waste of time to calculate AO on the wall for a big part of your scene if it's not going to do anything. But! Put two walls together in a corner which you are including in the view, and you should be using AO.

In general, all objects in real life get darker when something else gets nearby, and starts blocking some of the ambient light in the room. So the general answer, ignoring performance, is to always use it.

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Renderosity forum reply notifications are wonky. If I read a follow-up in a thread, but I don't myself reply, then notifications no longer happen AT ALL on that thread. So if I seem to be ignoring a question, that's why. (Updated September 23, 2019)