hi Kent. I'm just a little confused over why we're baking those two maps and applying them to our diffuse texture. Is it just a painting shortcut? I mean can't you add AO and displacement in the render at the end? I guess I thought baking was just for faking a low poly model to look like its high poly counterpart.
Excellent question kindabella. Baking for lo-poly purposes is arguably the most common reason for baking. But for me, as you hinted, I like to use bake data to assist my texture painting. I find that it helps unify the details between geometry and texture.
Personally I don't use AO for rendering anymore, as in an AO pass. It was good a decade ago when global illumination took too long to render - AO got us half-way toward more realistic lighting. But by nature, it's unrealistic by itself. However it works great as a utility for painting texture detail in crevices. Displacement is also helpful in a similar way, to add emphasis to the diffuse texture's divots and bumps.