Quidam said:This is really a key point. I'm sure it's come up before, but does concealment hinge on the observer being in the smoke, the observed, or both? Or either? My initial take would be either. If you're in the smoke then "a creature within 5 feet has concealment (attacks have a 20% miss chance)."
I could easily be convinced, though, should someone have a pertinent rules citation.
Here you go:
SRD said:To determine whether your target has concealment from your ranged attack, choose a corner of your square. If any line from this corner to any corner of the target’s square passes through a square or border that provides concealment, the target has concealment.
When making a melee attack against an adjacent target, your target has concealment if his space is entirely within an effect that grants concealment. When making a melee attack against a target that isn’t adjacent to you use the rules for determining concealment from ranged attacks.