AO seems to generally be used with the multiply blending mode as far as I've seen, however in Unreal Engine I made some comparisons and the Overlay node seems to give a better result. A value of 0.5 would be the original map, lower than that would be a lower intensity, higher would be a higher intensity.
Is there any reason for not using overlay rather than multiply? I find that overlay gives more strength to the AO itself, while multiply makes the overall texture way darker and doesn't change the AO intensity as much as expected. Examples are below.
Replies
Another thing to note: As far as I can tell you are previewing your "multiply" in a Blend_Overlay node, which applies an overlay blend anyway. You want to plug your texture into the multiply node directly and preview that.
If you multiply/overlay it with your diffuse textures, they'll ALWAYS be darkened/brightened regardless of the lighting.
Think of a sofa with soft cushions. The ao will darken the crevices between the cushions, which is good. But if you shine a flashlight down between the cushions (to find that lost remote!) you should see the cushion color. But if the ao is blended directly into the diffuse, you'll still see dark surfaces.
Better to feed the ao into the occlusion input, so it's handled properly for lighting.
Multiply, Screen, and Overlay Blending Modes in Photoshop - dgrin (smugmug.com)
That's not true. As @Eric Chadwick mentioned it is meant to be plugged into the AO slot, that's it. Of course one can get creative and feed it into various other aspects of the materials, but that is not the norm/standard way of doing things.
From Zap Anderson's The Joy of a little "Ambience"
http://mentalraytips.blogspot.com/2008/11/joy-of-little-ambience.html