Blender Render Tests - Ambient Occlusion
Basic Scene File Blend

Ambient occlusion creates some really nice lighting and shadows - The world effects the resulting look.
It is a type of Global Illumination - Uses Blender internal raytracer - NOT Yafray

Setup: 


The Next 3 images compare the Add, Subtract and Both modes - all other parameters remain equal

Add Mode


Sub(tract) Mode


Both Mode


Now - An addition of a of World Texture
Add Mode with Image texture Sky