Occlusion is an extremely important part of a games engine making sure that everything runs smoothly and is as optimised as possible for better gameplay. This process works by not rendering objects in that cannot be seen by the player. So if the player is looking forward at a building, but there is a part of the level behind that building the engine will use occlusion culling and not render it in until that part of the game comes up. If however, it used a different technique called frustum culling, the area behind the building would be rendered in but in the area behind the player would not be rendered(behind the objects that is).
Here are some images that illustrates this –
Here is a city with all the buildings and geometry that would get rendered.
This here is with occlusion culling turned on, which as you can see has only rendered the objects nearly and what is in view. From this you can see how much performance can be saved on the gpu by using this method.
To use occlusion culling effectively you have to make sure each of the zones are well sectioned making it easy for the engine to define.
Image credit –