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stealth I beleive does not affect this.
Confirmed by a rogue. I've been wanting to learn a bit about the spell for a fair bit, since I too was in doubt of if the double pom-pyro mages in the arena could actually see me... Thing is they've never actually hit me before so I suppose it's the same as with the warlock's detect invisibility spell.
I s'pose it's fair that you only get to see eachother while invisible (else arena-wise mages are too rogue-like), but it seems to me that somewhat ruins the purpose... Sure, you can get a good position. But specifically, in an arena, the odds are that warrior has taken up that position as well and your invisibility fades in front of his nose.