A Chameleon Circuit is a device integrated into nanotech power armor that utilizes the shapeshifting ability of nanotechnology to change the shape, texture, and color of the suit can to blend in with the surrounding landscape (rock, soil, vegetation, etc.) quite well indeed, especially when the trooper is motionless. The armor can also mask its heat signature (to a limiited level and for limited duration, the onboard heat sink not being limitless) to reduce the risk of detection by infrared gear. Motion sensors will still detect a camouflaged trooper unless they move very, very slowly.
Chameleon circuitry does NOT make a trooper invisible - they can still clearly be seen with the naked eye, and the unavoidable interplay of light and shadow on the camouflaged trooper will make them appear like a "distortion" in the landscape. That said, a casual glance in thier direction won't notice anything unusual, especially if the camouflaged trooper is standing still.
The faster a camouflaged trooper moves, the greater thier chances of being noticed. There is also a limit to how close they can sneak before thier target is bound to notice them, although it could be as little as a few yards with the right terrain (dense vegetation, for example).
Behind the ScenesEdit
The Chameleon Circuit's name and function are lifted wholesale from Doctor Who, where it refers to the (broken) device letting the TARDIS change appearance to blend in with its surroundings.