I think it works in two ways:
1. It detects the light level that the player is in and checks to see if it's below the threshold. If it is, then no tooltip pops up.
2. If your crosshair hits the back of the player, then the player's name is replaced with "Somebody". Once it hits the front of the player, then they get the player's name and are able to see it even if you're looking at the back of them.