That would explain it, then.
The reason you need to turn it on is so you can specify which stealth ships you want to start combats, and which you want to sneak by. Otherwise, your stealth armor ships would only fight when discovered by enemies.
Captain Bub: "Attack that enemy troop transport!"
Ensign Bubu: "Sorry sir, they can't see us because of our Neeto Technologies Mark XII stealth armor. So, er, well, we can't attack!"
Captain Bub: "Doh!"
PvK