Fascinating article on Discovery.com which explains what the on-board computer on a Google's self-driving car sees, how it detects other vehicles, pedestrians and traffic lights. Some amusing behavioural aggressiveness add-ons, as well:
Sometimes, however, the car has to be more "aggressive." When going through a four-way intersection, for example, it yields to other vehicles based on road rules; but if other cars don't reciprocate, it advances a bit to show to the other drivers its intention. Without programming that kind of behavior, Urmson said, it would be impossible for the robot car to drive in the real world.
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