Is there an official statement regarding the interplay between the following two sentences in the stealth entry in the SRD?
If people are observing you using any of their senses (but typically sight), you can't use Stealth.
and
Against most creatures, finding cover or concealment allows you to use Stealth.
Does cover or concealment break observation? If so, then what is the point of Rogue/Ranger HiPS? Does total concealment allow a stealth check when observed where partial concealment doesn't? Does total/improved cover allow a stealth check when observed where partial cover does not?
It's not an urgent question as my players and I are currently on the same page regarding this topic, but if there is a clearer answer I'd appreciate it.
Full cover and total concealment are both ways to break LoS...if someone does not have LoS to you then you can hide from them. HiPS allows you to hide without cover or concealment based on the version of HiPS you have...if I remember correctly the ranger's HiPS allows them to stealth even while being observed if they are in their favored Terrain. I will read through it all when I get the chance.
Being observed trumps less than total cover and concealment. However, you can beat observation with a bluff check to make a distraction. You can also start an encounter hiding, so you are never observed (that's how scouts work).