Actually the -20 adjustment is for "nearly impossible" tasks.
The group I game with has come to a different conclusion regarding the Hide skill and the HiPS ability.
From the PH: "If people are observing you, even casually, you can’t hide. You can run around a corner or something so that you’re out of sight and then hide, but the others then know at least where you went."
My group separates this from
"If your observers are momentarily distracted (as by a Bluff check; see below), though, you can attempt to hide. While the others turn their attention from you, you can attempt a Hide check if you can get to a hiding place of some kind. (As a general guideline, the hiding place has to be within 1 foot per rank you have in Hide.) This check, however, is at –10 because you have to move fast."
In the first case we apply no penalty if the hiding character can get completely out of sight before hiding (using a move and hide or move+move and hide sequence of events) Since the character is no longer being observed, he doesn't have to distract his opponent, so no Bluff check is needed, and he can hide normally. A pursuing enemy knows the hiding character went around the corner but doesn't know where he went after rounding the corner - thus no penalty.
In the second case, the character can't get completely out of sight with a single move so he distracts his opponent and makes a short move (= to 1 ft per rank in hide) combined with the hide action. Since the hiding character's opponent is only distracted and not really no longer observing the character the -10 penalty is applied.
Now on to HiPS - in our game we apply no penalty to the Hide check when using this ability because it is a supernatural ability to make the impossible possible. The character just hides - a now you see him now you don't sort of event. This ability is an exception to the "while being observed rule" and requires no distraction to work so no penalty applied.