OK so this is very interesting
A couple minutes w/ Google and I've answered my own question. Came accross an extremely interesting - but old - report:
http://www.usdoj.gov/oig/special/0007/criminal.htm
that has a very good explanation of the name check procedures.
Even though the report is many years old, I would be suprised if the process had changed materially from what is described here. Enjoy!
FBI procedures for processing bio-checks
(1) The search for information
Once the FBI's Information Resources Division (IRD) received tapes requesting bio-checks from INS, they ran an automated search comparing that data against information in their Central Records System. This process could result in either a definitive "no record" response or an indication that further matching efforts were required to determine if a record existed. Bio-checks that did not conclusively result in "no record" were known as "possible hits" and generate an Indices Popular (IP) response form. The "possible hits" undergo one or more additional search procedures at the FBI, after which the IP response form is used to report to INS the result of those additional searches.
The "possible hits" are first sent to the FBI's Name Search Unit where FBI personnel manually check the names against a database to eliminate "possible" records (records of individuals with the same name and other similar biographical information, who are not the subject of the bio-check). For this reason, the more information that INS can provide about an individual, the more quickly and thoroughly FBI staff can complete the bio-check. This Name Search Unit is also the office that initially receives bio-check requests made manually on a Form G-325A. If the Name Search Unit can eliminate all "possible hits" and determine a "hit" or a "no record," the processing is complete. In this scenario, the IP response form or the Form G-325A, as appropriate, is stamped with the final result and sent to FBI Headquarters for transmission to INS.
If the Name Search Unit cannot eliminate the "possible hits," the request is forwarded to the FBI File Review Unit. This unit manually pulls its files for the potential candidates and compares any biographical and geographical data provided to determine whether the applicant is, in fact, someone with "no record" or someone who matches information on file at the FBI (a "hit"). Again, the IP response form or the Form G-325A, as appropriate, is stamped with the final result and sent back to the FBI Headquarters for transmission to INS.
INS receives the IP response form or the Form G-325A along with any information about the applicant from the FBI. If the FBI information cannot be disseminated because it is "classified," for example, FBI file analysts draft a memorandum providing a synopsis of the releasable information. Because it will not provide information to INS related to another agency's investigations, the FBI may refer INS to another investigating agency to obtain the necessary information. This action is called a "third agency referral." The burden then falls on INS to obtain the necessary information from the agency indicated. If INS was the source of the information found in the FBI database, the FBI stamps the response: "no information in addition to that already known to your agency."
Not all bio-checks result in definitive findings. In such instances, the FBI would advise INS that it was unable to determine if the person about whom it has information is identical to the INS subject or applicant. Again, the ability of the FBI to determine with specificity whether the person in its records is the same person applying for naturalization was influenced, in large part, by the adequacy of the bio-check information provided by INS.
