According the Rules Cyclopedia:
If a thief can sneak up on a victim, completely unnoticed, the thief may backstab - if he is using a one-handed melee weapon, he may strike at particularly vulnerable points of his target's body. (Though the ability is called "backstabbing," the weapon doesn't have to be a stabbing weapon. A thief can use this ability with a club, for example.)
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If the intended victim sees, hears, or is warned of the thief's approach, the thief's attack is not a backstab; it is an ordinary attack, doing the damage appropriate for the weapon used.
When no battle is in progress, a backstab attack may require a Move Silently ability check. The DM will make all the necessary decisions on that matter.
Furthermore, in my old, red box, Mentzer, D&D Player's Manual it describes the backstabbing ability this way:
If a thief can sneak up on a victim, completely unnoticed, the thief may Backstab. If the intended victim sees, hears, or is otherwise warned of the thief's approach, a Backstab may not be taken but the thief may still attack normally.So originally, the issue wasn't necessarily the game mechanics, but rather the DM's discretion. Depending on the situation, a DM might require a Move Silently check, a Hide in Shadows check, both, or none. While I definitely am a big fan of the Labyrinth Lord rule set, I'm coming to appreciate it's differences from D&D. In this one little respect, I think Labyrinth Lord desperately needs to be tweaked. One of the brilliant features of old school gaming is how much is left to the dungeon master. The way it's worded in Labyrinth Lord specifically, though, is excessively binding and needs to be house ruled. Otherwise, no rational player would backstab until achieving a fairly high level. Not only that, house ruling it would be more in keeping with the original game rules.
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EXAMPLE: An Apprentice is carrying a sword, and sees an ogre approaching the party. The player says "I'll Hide in Shadows." The DM rolls 19 on d%, so the ogre does not see the thief (but the DM does not announce the fact). During the battle, the ogre gets turned around, with its back towards the thief. The player says, "I'll try to move in for a Backstab!" The DM decides that the ogre doesn't notice the thief's approach (no roll is made; it depends on the situation, and the DM's judgement) and says "The ogre doesn't notice you; roll for a Backstab." The thief player then makes a Hit Roll...