Warning: Long read, but for anyone who wants to know a bit about Arma 3, please stick around. I've been modding for this game for 15 years, and worked as a developer for projects based on the RV engine, which the Arma series is based on. This is a discussion to which I would very much like to contribute.
To begin, some of the comments I'm reading seem to be confusing AI with scripting; Ghost Recon's AI wasn't great, in fact, they were highly predictable, frustrating and in many ways, completely horrible. Ex: The AI's habit of turning 180 degrees and instantly shooting you in the head, from the hip, while you were lying prone over 200m away. Ex: Hordes of enemies running from across the map toward the sound of gunfire, while enemies closer remained standing on their street corner, smoking their cigarettes. Clearly, those are some monumental failings. What Ghost Recon did well, however, was to simulate basic small-unit tactics by using scripted sequences to control the AI units in certain situations.
An excellent example would be the way Ghost Recon's AI teams would attempt to suppress you and then flank your position upon taking contact. That isn't AI at work; that's a script, written by the game's designers. The difference being that AI at work are largely autonomous and do more or less 'what they want', within the confines of their programming. Scripted sequences rely on, well, scripts which tell the AI what to do and/or where to go, while still allowing them some degree of autonomy, such as still allowing AI to communicate targets to one another, call for help and engage targets. Hence, the utter predictability of that particular maneuver. When Ghost Recon's AI had to actually fall back on their own routines, they'd do stupid things like walk out into the open and stand there. Or, somehow magically know exactly where you are, and walk right up to you, even though you're hiding in a bush. Or walk up to a pile of the bodies of their dead friends, and then look around, as if to ask "What happened here?" before being added to said pile.
Conversely, if you look at Arma, particularly at Arma 3, the AI can be unpredictable on the battlefield, sometimes frustratingly so. When you want an AI squad to do one thing, even after you've given them waypoints and scripts, they still do what they want. Sure, you can predict in the macro sense what they'll do: If you fight a single squad, then they'll pretty much fight you head-on. If you inflict enough damage, then they'll retreat, regroup and counterattack until they're all dead or you're dead or you retreat. But, on the macro scale, they aren't predictable. This is because AI is actually doing the work, rather than scripts. Obviously, this isn't the case, if you're using Zeus AI, ASR AI, UPSMON (my personal favorite) or some other community-generated addon that claims to modify AI. They don't. None of them actually modify the game's AI. What they do is control and constrain the AI through the use of scripts and/or modified configuration files (we'll get to the latter in a moment -- it's of vital importance). Ghost Recon's developers simply used scripts to enhance the AI in-house, out of the gate.
On a macro scale, however, if you were to sit back and watch Arma 3's AI battle it out over a large area of terrain, over a long period of time (via the Zeus game mode, for instance), then you'd see something different. You'd see that the AI in Arma 3 actually do use coordinated tactics such as bounding movements and flanking maneuvers, both at the squad level and at the higher level. Does it look clean, neat and precise? No. It looks sloppy and chaotic. As it should. But they do what they should be doing. Most of the time. They will also call for reinforcements or support, provided you have placed those support assets and given units the ability to do so. No scripting is needed for this any more. Simply place BIS's game modules down, synchronize them with the desired units, and go.
As has been mentioned, Arma's AI does have some failings. They stink at driving, especially in convoys. Hot LZ's are another concern. (Note: This is a great reason to play with a gaming group that has competent pilots: You don't need to rely on AI to get you into and out of combat.) They're also nasty in close quarters, due to their habit of going prone upon enemy contact. Your team's awesome breach tactic, perfectly executed? Doesn't matter, because you weren't expecting a prone RPK gunner to be lying down at the end of the hall, just barely within view of the doorway, and he smoked your whole team. In some ways, that's maddening. In others, it simulates the behavior of other people pretty well. Yes, they also do silly things like turn in circles, stand/kneel/prone repeatedly and walk into walls on occasion. But on the large scale, it works. Also, there aren't any other games out there that offer an AI package capable of so much, especially one that is so easily complemented by community-created script packages.
Lastly, on to config issues, one of the game's biggest failings. To put it plainly, Arma's AI issues have very little to do with the actual AI, and almost everything to do with some other aspect of the game. That 'other aspect' is usually one of the game's main configuration files, which may control vehicle-handling, weapons-handling, etc. In particular, the weapon config entries, vehicle entries and the CFGAISkill class have a profound effect on AI. For clarification, all people, whether human or AI-controlled, are vehicles in the Arma engine. BIS are notorious for using a sledge hammer when they should use a scalpel, when it comes to some of their config values. This is especially true for weapon-handling values, in particular those which constrain the ranges at which AI will engage you. Have you ever gotten up close to an enemy AI in Arma 3, say, within 10 meters or so, and just had him look at you, as if he really wanted to shoot you, but couldn't? That's because he couldn't. By default, Arma's carbines, rifles, machine guns and long rifles are coded so AI can't engage closer than 30 meters. Think about that for a moment, and then ask yourself why they panic in close quarters. It's because their AI routine is telling them to shoot you, but their equipped weapon won't let them do so. Hence, chaos ensues. This is quite easily solved, and there are some mods out there that make the game a lot more fun by doing nothing more than -- I kid you not -- changing the ranges at which AI can see you and engage you. I won't go into the problems with the vehicle values or CFGAISkill, because they're numerous and would likely bore most readers to tears. I will, however, say that, by simply redefining many of the variables in CFGVehicles (the class in which all people are found in Arma), CFGWeapons and CFGAISkill, my gaming group was able to provide for ourselves a much more enjoyable and much more realistic experience. This is partially because, by redefining these variables, we've basically allowed the AI to do what they were programmed to do in the first place. You just aren't seeing in the vanilla game what the AI were actually designed to do.
PS: The Guard Waypoint was completely misrepresented in Burner's quoted piece above. It's one of the most powerful tools Arma can give a mission maker, provided the mission maker actually knows how to use it.