Ambient occlusion can appear in terrain obscured by fog when viewed at the corner of the screen

Look in the top left.

This is how the terrain appears when looking at it directly, notably without ambient occlusion.

However, by increasing the fog strength it does decrease the amount of ambient occlusion, but at the lowest strength the terrain appears a solid color with heavy ambient occlusion and looks quite bizarre.
I believe this is because you use a trick to help the fog out in obscuring distant terrain by coloring distant blocks the same color of the sky, but it appears ambient occlusion is still applied to these blocks which can create this effect that's more noticeable at lower fog strengths. This is just my theory, don't know this for sure.
A depth fadeout for the AO would work but maybe there's a more elegant way!

I understand what you're saying. It's actually a side effect of how MakeUp works. As strange as it may seem, the fog is applied to objects before ambient occlusion, so the occlusion is always rendered "on top" of the fog. That's why it never compensates perfectly.

I know it's weird, but it's one of those things that allow the shader to be fast. I guess there are many ways to do it, but in the end, this is how the shader works. :S

I understand what you're saying. It's actually a side effect of how MakeUp works. As strange as it may seem, the fog is applied to objects before ambient occlusion, so the occlusion is always rendered "on top" of the fog. That's why it never compensates perfectly.

I know it's weird, but it's one of those things that allow the shader to be fast. I guess there are many ways to do it, but in the end, this is how the shader works. :S

Ah, ok! It's not a major problem as I've only just noticed this after using the shader for years.
It's funny as when I saw this I was immediately reminded of ambient occlusion in ReShade where effects are entirely post process so it's a common sight there. For ReShade they mitigate this problem by having the ambient occlusion gradually fade out based on depth and the distance is typically user controllable so you can adjust it for the specific game, but in the case of MakeUp I'm assuming it can be done based on render distance. Is there any reason why this couldn't be done with MakeUp?

Closing as not applicable 👍

In fact, the effect of ambient occlusion does attenuate with distance, just not in the same way as the influence of fog. Everything happens in different locations with different sources of distance information, and speed is prioritized.