This is a common misconception that AI was able to cheat vision, but I have extensively tested this and have had other retest it for me, but AI does not cheat in X-COM (prior to turn 20 / turn 10 if 2 or less remain).
Alien's gain vision on you in the following ways:
1. They outright see a soldier.
2. They mind control one of your soldiers and he see's another soldier - this is the commonly how MC cascades for them.
3. This is the one most people don't realize - you shoot at and hit an alien - no matter where you are on the map. This is the AI's only recourse against people who abuse smoke / squadsite and it really works wonders when they have MC.
4. There are a number of map errors (especially in TFTD) where you can see through the landing craft from certain angles. This one works both ways, very abusable in the lightning.