Another source engine cheat dev here. Source has had dormant entities at long ranges in culled-off areas [sectors of the map demarcated by func_areaportal] since... as long as I can remember.

Your cheat couldn't see those players because the server was doing a very cheap and primitive visibility calculation, deciding the player entities are dormant for you, and choosing to not send you the data for them.

This is different from the later-enabled player PVS system, which does more expensive ray casting once you get a certain distance away, which cut down on wallhack cheats a lot more [although they are still very useful]