If you have a category that in and of itself, has no posts. But has child categories that have posts and you do a wp_list_cats('hide_empty=1').. the parent category gets hidden.
This seems like a bug to me, as the children have content.
So forexample if you do something like this;
Which will display categories, but only the children of the category you're in.. and you flip hide to 1, suddenly the parent category will be hidden.. this is wrong.