Ambient Occlusion will reduce lighting in locations where objects get close together (like the corner of a room) to fake natural lighting. In general, it doesn't do a bad job but it won't handle any back scattering off surfaces and can get corners completely wrong depending on what you are trying to accomplish.

When you switch to regular indirect lighting, all the back scatter comes in to play which can be quite different depending on what's going on.

It's better to design your scene for the lighting you're going to use.

-Kix