This presentation was given by Damian Isla from Bungie Studios. It presents the basic architecture and tools used to build the AI system in Halo 3. This lecture specifically detailed the encounter logic.
Encounters are the "dance". Basically how the system reacts and collapses in interesting ways. The "dance" is the illusion of strategic intelligence. Designers choreograph the "dance" to be interesting and drive the pacing of the story, kinda like a football coach directs his subjects.
Halo 3 uses a 2 stage fallback. Enemies start off occupying a territory. The aggressor (player) then pushes them back to fallback point. After this they are pushed to the last stand location, after which the player will "break" them and finish the battle. "Spice" is added on top of this by designers to make the encounter play out in a more realistic fashion.
Mission Designers handle the encounter tasks with the AI Engineers handling the squad (how the AI behaves autonomously).
Halo 2 used the Imperative Method to control AI (Finite State Machine). The designers were given access to dictate what happen as various events were triggered (ie. enemy starts losing battle). The primary problem with this model was the need for explicit transitions (n^2 complexity).
Halo 3 took a different approach, using the Declarative Method. This basically works by defining the end result you are looking for (with reference to AI). You enumerate the "tasks" that are available and let the system make the decision on how to perform these tasks.
One of cool things about using the declarative method is the ability to set relative priorities. Example would be guard the door but if you can't do this, then hallway. Also, it brings the notion of hierarchal tasks (sub-tasks). Example would be guarding the hallway means guarding both ends and middle.
Funny comment that Halo 3 AI works like a Plinko machine. This means pour tasks into the system, prioritize them, and then pour enemies in and let the system place them and control their behavior. This also means it's an upside down Plinko machine ;) This is because tasks can be activated/deactivated at will and cause the enemies performing them to re-evaluate the situation and "do something else".
The system uses a proprietary scripting language named HaloScript. This allows designers, who are not programmers, to design and use the system.