Technically, baked AO into your diffuse is not going to be completely realistic if you're using an engine with dynamic lighting everywhere. For example, if you bake some AO into the mouth of a monster, you can then never shine your flashlight into that monster's mouth and see all the internal details. Though I'm not sure…
It's often combined with the diffuse, though it can have advantages to keep the AO as a separate file. In this example, I used tiling textures without any shading in combination with a lowres map to get nice shading and detailed materials. And I could also use the AO to blend some grime in the crevices.