There's actually a couple things I'd like to add to this thread, suggest, and point out in my efforts to be helpful.
Regarding the invisibility issues and 'visually undetectable' scenarios, I'd like to point out that that the SRD/PHB allows characters to detect an invisible opponent using a Spot check:
"A Spot check result higher than 20 generally lets you become aware of an invisible creature near you, though you can’t actually see it."
For purposes of spotting invisible foes, I treat the Spot skill similar to the Scent ability. The DMG specifies ranges for spotting people in certain terrain and conditions. If someone succeeds on making an appropriately modified DC 20 Spot check while an invisible opponent is within spotting range (as defined in the DMG), then I say the person notices something in a certain direction. Once the character moves and comes within 5 ft. of the invisible opponent, I then allow another DC 20 Spot check to pinpoint the opponent. Since the opponent is invisible (granting total concealment), the character still has a 50% miss chance when attacking the pinpointed invisible foe. If the PC has difficulty trying to pinpoint an invisible foe (because the foe keeps moving, for example), then the PC may make a Spot check to notice the direction of the invisible foe as a standard action. Ultimately, this means that invisible foes are incredibly hard to pinpoint with Spot checks (and rightly so), since the invisible foe can take two move actions to move around each turn while the PC can only take one move action after attempting an appropriately modified DC 20 Spot check as a standard action.
Under the method I just described, it does in fact make ranged attacks against invisible foes impossible unless the ranged attacker has some other way to pinpoint the 5 ft. square where the invisible opponent is standing. However, this difficulty is somewhat easily overcome if the ranged attacker can see an ally actively trying to hit something in melee combat in a specific 5 ft' square.
Regarding the Hide skill specifically, I have three comments.
1. Some people have been asking how often they should have the players make Hide checks when the players are tailing someone. I'd like to point out that recent published adventures (including the Expedition to Castle Ravenloft adventure I'm presently DMing) only allow characters to make Spot checks every 10 minutes to detect a foe using Hide checks to tail the characters. I think that's also a pretty fair guideline to use for NPCs being tailed by the players. However, this is restricted by the players' ability to actually keep the target they're tailing within visual range. Once again, look to the DMG to provide Spot ranges in specific terrain conditions.
I run the situation in the following order:
(NOTE: This assumes the PCs are at a distance where Listen checks would be moot.)
-The PCs must acquire the target they're tailing within visual Spot range as determined in the DMG.
-The PCs make appropriate Hide checks modified by penalties necessary to keep up with the target they're tailing; the PCs must be in terrain that allows cover or concealment (or have some other way of providing it themselves). I depart from the SRD here and allow crowded streets to provide 'hard' cover instead of 'soft' cover to allow a Hide check.
-The target gets its first Spot check, which is also limited to Spot ranges according to terrain conditions; if the PCs are outside the Spot range of the target, then the target automatically fails its Spot check.
-10 minutes later the PCs must make appropriately modified Hide checks opposed by the Spot check of the target they're tailing as before.
-If at any point the target moves outside of the PCs' Spot range as determined in the DMG, then the PCs fail to tail the target and must start this process over again by first relocating the target within Spot range.
In situations where someone is trying to tail/shadow someone else, I also recommend checking out the Skill Tricks available in Complete Scoundrel, since often times they let you make additional skills checks (like bluff) to try to cover the fact that you're tailing the person who spots you.
2. I suggest you treat someone as being 'observed' only when the person does not have cover (partial or total) or concealment (partial or total) to interfere with the view of the observer. This still allows the Hide check to be very useful.
Some people may claim that this makes spells/items with effects like Blur or Displacement overpowered and equal to invisibility, since technically someone could don a Cloak of Greater Displacement (50%) and constantly Hide 'in the open' so to speak. My counterclaim to that line of thought is that, UNLIKE invisibility, someone with only a concealment effect is actually Spotted and visible for purposes of targeting, line of sight, etc. for both ranged and melee attacks if the Hide check is overcome. An invisible foe never needs to make a Hide check, and even if the location of the foe is pinpointed individuals are still forced to target the 5 ft. square where the foe is standing instead of the actual foe. The ultimate result of this situation is that non-invisible foes with only concealment can still be targeted for purposes of spells like Hold Person, while invisible foes cannot be targeted for such purposes because they can not be seen (thus they must be detected in some other manner for purposes of such spells).
It doesn't help that the condition of 'invisible' also includes 'total concealment,' but I think people need to stop equating the two since there are tangible differences as just described. Venn Diagrams would probably be helpful in this situation. =D All invisible foes also have total concealment, but all foes with total concealment are not also invisible.
3. Hiding from someone, particularly in combat situations, should be a very difficult task. As previously pointed out in this thread, the PHB and Complete Adventurer already contain highly restrictive rules when trying to Hide while moving or moving from cover to cover. Please familiarize yourself with these as they help resolve a number of questions already asked in this thread. These are restrictive for a reason since the skill can become overpowered as others have also pointed out in this thread.
I think that two combat scenarios have been mentioned where the Hide skill was intended for use:
1) Ambush scenarios, where an opponent is considered flat-footed.
2) Breaking initiative and hence combat rounds to allow escape from an enemy.
Outside of those two specific instances where someone either lies in wait to ambush a foe or attempts to Hide in an effort to flee, Hiding in combat to gain advantages should be extremely difficult.
Hopefully my opinion and this info was helpful to you folks.
