Yup, there should probably be some little error margin - especially if the lizard is just only at the edge of the sound's range and barely heard it. Could probably do this simply by displacing the perceived sound source a bit in a random direction in those cases. I think I'll try it out, but while it is realistic it also introduces yet another random factor into the game - something of which there's already too much. If the game is completely unpredictable it can't really be played because each action may have any outcome. If it's deterministic however you can count on stuff to work in a specific way - for example jumping on a floor above a lizard and have it go to that spot to investigate, rather than going somewhere else. So it's a balance, but yeah, there should definitely be a little bit of fuzziness to the hearing.
Haha yeah we want to avoid the exclamation mark if we can! We have a bunch of other things going on, none of which are as clear as an HUD element, but I think that all of them combined will be enough to make an experienced player know their stealth state. A lizard that has spotted you starts emitting bubbles from its head, the head is shaking, the lizard starts moving much faster and opens its mouth. I haven't yet gotten around to the actual lizard vocalization, but that's going to play a big part as well - there'll be hissing and screeching. One thing we've been talking about is subtle sound cues for "hostile creature spotted you" and "hostile creature lost track of you" etc. Not a loud ugly sample, but just subtle little effects that can weigh in with the rest of the little signals the game gives you to help you form an idea about what is going on and how bad a situation you're in. This won't be very clear to a new player compared to a HUD pop-up, but hopefully you will grow into it. This is sort of where the player's progression is at in our game - we don't have levels and barely any equipment you can carry with you, instead it's about the player slowly learning how to interpret and maneuver the signs and signals of this fictive world. Or that's the idea at least, let's see how well we do haha!
Update 438Further messing around with hearing. I got the "go check out what made that sound" behavior in for lizards, and then had to do a lot of tuning to make them less confused about everything that was going on. The main situation was two lizards fighting and me running by on a floor above - the challenge was to make them understand that they each saw the other lizard right in front of them, and thus conclude that the sound above probably was coming from a third entity which might be worth checking out. After some fussing it seems to roughly work! Also crouching mode is now silent - actually completely silent, which might be a bit too much. But it's a lot of fun to trick a lizard by jumping in some spot or throwing a rock, and then quickly slithering away along some clever route in the crouch mode.
Also, we're starting to think about a new region.
James has been trying out some architecture and layouts, and I've been messing a bit with a palette and some settings that are going to be needed, such as wave amplitude settings for the water.
The waves don't look very amazing at this point, a bit too regular and machine-like. I think that some light randomization might help a lot.
This region is going to be ocean-inspired (maybe it's the actual ocean, maybe it's just a very large cistern or flooded area, depending on if you want to imagine this industrial complex as something city-sized that ends at the shoreline, or something larger o_O).
Contrary to Drainage System where the water elements were coupled with some claustrophobia in narrow underground pipes, this is going to be about large spaces where you can swim freely, which I think will be a lot of fun. Part of the gameplay will happen up in the structures sticking out above the surface, part of it down in the actual water, and obviously you will be safe in neither place.
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its been a rough one, but seeing peoples reaction to the video (and a little bit of destructiod hype!) seriously makes my week: http://www.destructoid.com/new-rain-world-footage-justifies-the-title-293879.phtml 
Thanks for pushing through until it's good though, instead of just accepting any old animation I throw at you! 