Could never had said it better than Stiebler...
Concerning time compression (TC):
SH3 calculates the position of every unit (or unit block, such as a convoy) at every time unit (whatever the internal time tick may be). If you run at 1xTC then no unit, including your U-boat, has travelled very far when the update comes. At 128xTX, everything has moved 128 times further before updates occur. At 1024xTC everything has moved quite a distance before the update occur. So a ship or aircraft may jump suddenly into the middle of your field of view when it wasn't visible before. Alternatively, it may hop completely over the U-boat without either side ever seeing the other. I think use of TC above 512 is unwise, except to accelerate travel to remote patrol areas.
It is possible to use interpolation routines to check whether two units have hopped over each other without spotting one another. I've done it myself for a customer, but it is complicated and Ubisoft, probably wisely, has decided not to add the extra computational burden.
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