I am quite curious about this myself. Here's a quote from Brad:
So I’m pumping the computer AI to “challenging”. At this level, he’s identical to the human player still except there’s a few more APIs that get used (a little more CPU gets used). Those APIs largely revolve around recruiting champions more aggressively and more intelligently handling quests. In the XML, these algorithms are based on <AIIntelligenceFactor>1.5</AIIntelligenceFactor> which is my own voodoo I use to determine what functions I’ll use. Go over 1.5 and it might include cheats so for future modders, never go over 1.5 if you don’t want the AI to potentially be “Cheating” (where cheating would include an imbalanced map, getting champions placed in slightly closer to AI starting locations, etc.).
But it from December 29, 2011, so things might have changed in the meanwhile.
Here's the link: https://forums.stardock.com/414671/page/3
