A friend and I were having a discussion about how a FPS server updates the clients connected to it. We watched a video of a guy cheating in Battlefield: Bad Company 2 and saw how it highlighted the position of enemies on the screen and it got us thinking.

His contention was that the server only updates the client with information that is immediately relevant to the client. I.e. the server won't send information about enemy players if they are too far away from the client or out of the client's line of sight for reasons of efficiency. He was unsure though - he brought up the example of someone hiding behind a rock, not able to see anyone. If the player were suddenly to pop up where he had three players in his line of sight, there would be a 50ms delay before they were rendered on his screen while the server transmitted the necessary information.

My contention was the opposite: that the server sends the client all the information about every player and lets the client sort out what is allowed and what isn't. I figured it would actually be less expensive computationally for the server to just send everything to the client and let the client do the heavy lifting, so to speak. I also figured this is how cheat programs work - they intercept the server packets, get the location of enemies, then show them on the client's view.

So the question: What are some general policies or strategies a modern first person shooter server employs to keep its clients updated?