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1. Mostly. In ESO its safer to hit from behind than the side in order to proc certain sets
2. Hitting bosses in the back refers more to dungeon and trial bosses where the tank can turn them around or hold aggro so DPS can run around to the back
3. I suppose. But as you are aggroing the boss with your presence in solo arenas, flanking sets are going to be difficult to impossible to use
To my understanding, "Flanking" is attacking an enemy from any of the 180 degrees behind an enemy. At least, that's how one should interpret the description "attacking from the sides or the back of an enemy". Whether the programmers took some liberty with that requirement, I cannot determine. It is hard to observe the effects of 'flanking' in-game since latency or lag can often make an enemy appear to be facing one way when on the server they may already be facing an entirely different direction. This phenomenon can be observed more frequently in PvP but it can also happen in solo PvE depending on server lag (desync). This is likely why stealth detection is so random and all over the place, even when thieving from NPCs.