During this phase you can reset the private transponders for your ships so that they conceal themselves from any empires you choose.  If you conceal a ship from an empire, that empire will see that ship on LRS only as unidentified tonnage (and will only be able to see its owner and class if it on SRS).  A ship with a public transponder cannot be concealed from any other empire; you must first toggle that ship's transponder to private mode.
 
Allies: Allied empires can never conceal ships from one another.
 
 
Abandoned Empires: Abandoned ships will always be concealed from non-allied empires.