The way I understand it, the order of height is... regular units<large target units<forests<hills. This means large targets like stegadons can hide in a forest or behind a forest or hill. All units can see 2 inches into a forest, or 2 inches out of a forest. Units on hills can see over anything, except other hills. Units on hills can also be seen by anything they can see from the hill.
For other, less common types of terrain, just work out with your opponent before the game how line of sight will work for each piece.