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That will do what you want, Friends wont show you in any game but will show you as online.
It doesn't though, as thats a super, super coarse setting.
For an example, I achievement hunt in games. I enjoy using community sites like steamhunters and exophase to compare my progress with others and engage in friendly competition. Doing this requires sharing what I have played previously - which I'm fine with. If someone wants to try to cyberstalk that page and refresh it to try to figure out what I'm playing right now - thats not the problem I'm trying to solve for.
So my choices currently are:
* Stop using the steam friends feature entirely, and hope it doesn't auto log me in, especially when I switch devices.
* Be vigilant about manually controlling my online/offline/invisible settings, which is error-prone
* Sacrifice asynchronous community engagement to protect real time privacy
* Do nothing, deal with the impact of this data being shared.
As you can see, the setting mentioned is *almost* what I want, but I want to be able to apply it independently to the realtime "You're playing X *right now*" and the non-realtime "You got an achievement in halo yesterday". The functionality is almost there, but not quite.
Youve moved the goalpost. You made no mention of also hiding achievements in the OP. You just wanted a way for people to not see what you were playing while still being online.
So, YES that did meet the requirement you stated in the original post. NOW, after you added a requirement its "almost".