In FF8, encounters occur on field screens at known points. The step count is consistent as a Hard Reset is required for submissions, which removes the ability to manipulate Step Count before the run begins. By using this knowledge, we can walk between certain encounters to avoid some of them. In a typical Any% Run we avoid 6 encounters by taking walking steps, with more advanced routes skipping a 7th encounter.
Below is an in-depth explanation of the Step Count System in Final Fantasy VIII. It is the same system on all version of the game. It is also worth mentioning in advance that the Encounter Skips exclusive to PC/HD (Training Center + Deling Sewers) are not directly tied to the Step Count mechanic, as they work by changing screens on the exact fraction required to trigger an encounter.
When a set distance is traveled on a field screen with active encounters, a value called 'Step ID' increases. This is typically 2 audible running steps by Squall. Throughout the course of an Any% run we typically reach a value of ~300 Step IDs with normal movement. This is the consistent amount of Step ID's incurred, whilst performing the mandatory story triggers and equipping Enc-Half/Enc-None when learned. This means that Step Count typically ends after Fisherman's Horizon during an Any% run, as Enc -None would be learned. (Steps are counted to a value of 256, then loops back to 0 but increases an Offset Value to +13. So in effect Step ID 300 = Step ID 44, with an Offset of +13.)
This Step ID value itself is tied to a smaller Fraction value. When the faction value reaches 256, the Step ID increases by +1. The value for fractions depends on which screen Squall is on, as each screen has it's own 'Encounter Rate' value. For example; the Training Center has an Encounter Rate of 12 whereas the Deling Sewers has an Encounter Rate of 6. Each time a Fraction is moved on those screens, the value is increased by that Enc Rate value. (After an encounter, the Fraction value is not always reset to zero, it can be set to 0, 2 or 4.)
As Step Count begins consistently, we are aware of when/where the encounters will occurs on field screens. For example, we always get 2x Bats on the 3rd screen of the Fire Cavern. This battle occurs at Step ID 18. So to further explain this idea, if you ran in circles on the first screen of the Fire Cavern, or even in the Training Center, an encounter will occur at Step ID 18. The only reason it happens on the 3rd screen of the Fire Cavern is that we are moving to complete the story by going directly to fight Ifrit. The same applies to all the other encounters throughout the run. They occur at a known 'Step ID' and this location becomes consistent, only because we move on the same path each run.
To further explain as to why it occurs at Step ID 18 is because of a 'Danger Limit' value, or sometimes called 'Battle Check Value'. Each Step ID has a corresponding, predefined Danger Limit value. When this value is higher than Squalls 'Danger Value' triggers an encounter. The Danger Limit for Step ID 18 is 67 as shown in the table on the right.
When Squall runs, he incurs +5 Danger Value per Step ID. By the time we have ran to 18 Step IDs, our Danger Value has reached 90 (18 x 5 = 90). Once arriving at Step ID 18, The Danger Value of 90, is greater than the Danger Limit of 67, therefore a 'random' battle occurs. After the encounter, Danger Value is then returned to 0 and the process begins again. This is the basic principle of how it works for the entire game.
The ability to 'skip' encounters then comes from utilizing walking steps. When Squall walks for a Step ID instead of running, he only adds +2 to his Danger Value. In situations where we can keep Squalls Danger Value beneath the upcoming Danger Limit value, the encounter will not be triggered. It's worth mentioning that not every encounter can be skipped like this. With certain encounters, it's not possible because the Danger Limit is too low to avoid. Also some encounters are deemed not worth skipping, because the time taken to walk enough steps would be too slow.
The first example in an Any% route of utilizing walking steps to avoid an encounter occurs in Dollet. Our 6th encounter is typically 1x Galbadian Soldier on the the mountain after the Anacondaur fight. This encounter occurs at Step ID 74, after which, our Danger Value is reset to 0. If no further action is taken, you would get an encounter at Step ID 84, when the Danger Limit = 48 and our Danger Value would be 50 (from running from Step ID 74 to 84 (10 Step IDs x 5 = 50). As the Danger Value of 50 is greater than the Danger Limit of 48, an encounter would occur.
To avoid this, we take 2 walking steps with Squall (1 Step ID) somewhere between the Encounter with the Soldier and when the next encounter would occur. Different routes prefer to take them in varying places, some outside or entering the Communication Tower and some outside the Pub before leaving Dollet. Either way, this brings us to Step ID 84 with a Danger Value of 47, which is less than the Danger Limit of 48, so the encounter does not trigger.
As one further point of clarification, the number of steps walked does not equate to the amount of Step IDs traversed. This is again due to varying encounter rates on different field screens. However, when walking 2 steps with Squall, that is typically used to safely increment the Danger Value by +2, over 1 Step ID. The moment the Step ID changes value, is the moment that the game decides the value to increase Danger Value (technically you could press walk for one frame as the Step ID changes, but that is not possible RTA).