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It is used as a direct counter to the camouflage skill. When an opposing player is prone, a check is conducted to see if the player is camouflaged from view of you. If your awareness level is higher then the camouflage skill then they will render in, if you loose the calculation then the other player will not render and be camouflaged.
This skill also deals with the unfair advantages of using third person over first. If a player is out of your sight, if you were looking at them in first person, then they will also render out of sight in third person. (Like the disappearing player behind a car situation I'm sure you have noticed) Awareness determins for how long you're able to see them as well as hear them after you have peeked from cover to first spot them.
This skill is leveled by seeing loot items.
From audio point of view, awareness gives you extra sense of your surroundings, something like entering the "zone". Ambient sounds are a part of that mechanic: depending on your awareness skill, entering focus mode will lower the volume of ambient sounds and pump up the sounds that could be a possible threat to player (footsteps, gunshots, etc.). Also, the origin position of those sounds are much more precise. This mechanic has it's use when hunting and tracking animals: animals will make noise more often and louder when in focus mode.