What is Ambient Occlusion used for?
It simulates the way light behaves in reality. Instead of applying a universal amount of ambient light all over a model, it looks for the areas which are least able to receive light ( in others words, the nooks, crannies and crevices where not much light can reach ) and it applies a lower ambient light value in those places than the wide open areas where lots of light can reach. It tends to give a greater sense of depth and "3D-ness" to objects because of that.