That idea probably came from the developer's blog, which talked at length about complaints people had about the AI in GalCiv 1, which worked exactly like Neruz said. And while I don't know if it's true or not that GalCiv 2 works the same way, I'd be surprised if it wasn't true. Think about it - the AI is part of the program that you're playing with. By definition, it's plans and strategies have to draw from some kind of information. The info fed to it is the what's going on in the game. For the AI to not be omniscient would require making a double-blind filter, where the AI can only use information it's logged as encountering.
Entirely and obviously possible, but probably a Hell of a lot harder to make work than just letting the AI see everything in the game's memory.
It's not harder, but it does gimp your AI, since as i said, ultimately it has no imagination, which is a serious flaw in complex games like GalCiv.
What most games do is point at the AI and say 'you can't use this information'. On lower difficulty levels, they're not allowed use lots of information, in fact many 'easy' AI's are restricted to the same amount of information that the player has. Their lack of imagination then gimps them badly, which is why easy AI's tend to suck.
As the difficulty level increases, the AI is allowed to play with more and more information, until often at higher levels all the restrictions are lifted entirely.
I'm not sure about at lower levels in GalCiv2, but at higher levels the AI most certainly does cheat it's pants off. Max level AI's take a look at what you're building and researching and then build and research the counters to those things, you can actually see it if you cheat yourself and check out what the AI is doing, the AI will often deliberately switch tech-trees just to get the best possible counter to whatever it is your doing.
Ironically, the AI also does this against
itself, if you get lucky and avoid it's wrath, at higher levels it will get into a rediculous progressive arms race with itself that looks like something straight out of the Lennsman series. Of course it's behaviour is randomised and it's given species-specific restrictions to try and avoid these sort of self-perpetuating loops.
The other thing you might notice against the AI on harder difficulties is that it has a remarkable knack for putting ships in exactly the wrong place at exactly the wrong time, this isn't luck, it knows exactly what it is doing.
And of course, finally, the AI is perfect at mathematics. It cannot accidentally stall it's economy and when many of the lower difficulty behaviour restrictions are removed it can use it's economy to a far greater efficiency than any human ever could. The AI has no limited attention span and is able to pay full attention to everything it owns and mesh the entirity together as a whole. If it wasn't for the fact that the AI is not actually Intelligent, it would soundly trounce you every single time from this advantage alone.
Another example of this kind of 'cheating' is Aimbots in FPS's. The AI has absolutely 100% perfect aim, because it can do complex ballistics calculations far faster and to a much higher degree of accuracy than you ever could. The game has to deliberately randomise the AI's shooting to prevent it from always winning. This isn't the AI using information it shouldn't have (although it often does as well) this is just the innate advantage an electronic computer has over the human brain.