Could ambient occlusion be used correctly on skinned models that are animating? It would seem that it only works on static objects that could be repositioned, rotated and scaled as a whole, but not when its geometry is deforming because the radiance map would have to be re-computed. Is this correct?
If by pre-baked ambient occlusion, then it's certainly used less on skinned models but is still used. Some will prebake only on areas that move less relative to each area. World of Warcraft, for example, has always used it on character models. Areas like armpits and etc. can still make use of it, and it's probably a good idea for any game still needing prebaked ambient occlusion.
I imagine that WoW and many other games are not prebaking AO but simply painting it into the diffuse/albedo maps by hand. That's something artists have done for decades. Centuries? Millenia?