John,
ambiance falls in the category of reverb although it is not perceived of as reverberation.
As you might imagine, the details of algorithm design are kept close to the chests of all players, the majors being Lexicon, TC Electronic, but in general there is a lot of processing going on - more in the best devices.
Multiple soundpaths are simulated, each with their own individual characteristics of delay and EQ. If the reverb unit is being fed a stereo signal, the ambiance or reverb will be appropriate to the source. For example, a signal component that is hard right in the soundstage will trigger reverb signals that are louder and have less delay in the right than the left output of the reverb.
When short enough delay and decay parameters are chosen by the engineer, the "reverb" stops being identifiable as such and disappears into the subliminal realm where it is identifiable only by its absense when bypassing it experimentally.
At this degree of subtlety, it might rightly be labelled "ambiance".