When a character is surrounded by magical darkness they are considered blinded when trying to see other creatures, and invisible when other creatures attempt to see them.
Darkvision does not pierce magical darkness, but Ultravision does.
Spells or effects such as True seeing and Ultravision do not "lift" the Darkness for the character, rather it allows the character to target items and NPCs normally. The player can use the Tab key to "see" where enemies are when he/she has one of these effects active in Darkness.