It must, imo, relate to administrative issues. If a visitor does anything administratively "directly" (after registering a new member), or a mod or admin edits or deletes a post, or goes into a staff chat, that all shows as "Private" I believe.

Otherwise, if you choose to be visible, others see: You're changing your basic profile, viewing your My Home, reading/replying to a post, or making a new post, or in chat.

There's an option to not show exactly what post/forum you're reading. It used to be that way all the time. DocJohn gave us additional privacy to opt out of that.