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Daedric Banishment was supposed to make the characters unable to interact with anything for a short period of time, as if they were briefly transported into Oblivion, but there was an error in the code and the staff was never finished, so all it does is make your enemies invisible and paralyzed. Unless they're Vampires, because Vampires can't be paralyzed, so the staff will just turn them invisible and piss them off even more.Mbjones90 (talk) 20:47, November 14, 2009 (UTC)
Perhaps there was an update, but Banishment actually has the following effect; "Ghost-like apperance and body". What this means is that the character can not be attacked, although still spoken to. Spells, attacks, and even arrows simply pass through the character as though they were a ghost. This is very much the same idea as Sheogorath's Staff of Sheogorath spell; Voice of Sheogorath.
Voice of Sheogorath is a spell that freezes the target in place, making them unable to move for fifteen seconds while at the same time making their being "semi-transparent" and also "semi-trans-porus", or able to be moved through partially. While the target can not actually be walked through, weapons and spells simply pass through. This is the exact same idea for Banishment.
I have found this staff too, while not being utterly useful like just paralyzing targets, it can be used to some affect. If you wish to distract enemies, use a Frenzy spell on them then cast it on one of them. The other will either continue to attack the banished enemy, or they will stand still because they can't see their target. This can give you some more time to run or loot a chest ect.