A typical condition of most game environments is having a game object become either obstructed by another object (such as a wall or beam) or occluded in a room where the listener can only hear a few muffled sounds leaking through the walls.
The following diagrams illustrate examples of occlusion and obstruction.
Obstruction can be modeled by applying a volume control and/or a Low Pass Filter (LPF) affecting only the direct path of the signal. The environmental reflections are unaffected.
Occlusion can be modeled by applying a volume control and/or an LPF affecting both the direct path and the environmental reflections of the signal.
Obstructions and occlusions can happen simultaneously and are modeled with the direct path being affected by both the obstruction and occlusion value. However, the reflection path is affected by the occlusion value only.
Here is a diagram of the obstruction/occlusion processing pipeline inside the sound engine: