Yes - the presence of ambient light directly overrides the effect of light sources. This makes a certain amount of sense: The sun is basically assumed to be so bright that it drowns out everything else. Like in real life: Put a candle outside, and it has basically no effect. Do the same in a cave, and lights change radically. The weighting basically "compresses" the brightness range on top of that, in order to emulate our eyes adjusting to different lighting conditions.

I was a bit skeptical at first when I read the code, too, but I think it works rather well.