I'm confused too!
Shadow Blend (Su): In any condition of illumination other than full daylight, a shadow mastiff can disappear into the shadows, giving it
total concealment. Artificial illumination, even a light or continual flame spell, does not negate this ability. A daylight spell, however, will.
*SNIP*
Edit: From the Hide skill description: "Total cover or total concealment usually (but not always; see Special, below) obviates the need for a Hide check, since nothing can see you anyway." Special: If you are invisible, you gain a +40 bonus on Hide checks if you are immobile, or a +20 bonus on Hide checks if you’re moving.
I'm still confused as to why it needs Hide...doesn't it want kids to know it's there, just not be able to pinpoint it?