I think I saw my first obvious example of the Radiant AI yesterday. I was fighting in Oblivion, trying to close one of the portals (just for fun, because I happen to think it's fun) when I ran into one of those Dremora mages. We were on top of the portal tower and there were several of those red teleporters there. Anyhow, I ran up to the mage and started smacking him with my sword, and he summoned one of his beasties. Nothing new so far. But then he suddenly ran into a teleporter and teleported away! I didn't see which teleporter he chose, so I stayed and sliced his summon to pieces instead. The instant the summon died, the mage teleports back, summons yet another (even stronger) creature and teleports away again! This time I see which teleporter he chooses so I follow him, only to have him teleport away again the second he sees me. When I teleport back, he is hiding behind his huge summoned beast. I finally beat him up, but that was one of the best fights so far in Oblivion for me.
Edit: Spelling.