During normal operation of the hard disk, the drive is constantly analysing the disk surface.
If it finds a problemmatic area (one or more sectors where the data is not possible to access in a pre-defined time), it tries to read the data and copy it (reallocate) to the spare area. This may or may not complete successfully (depending on many factors, eg. how seriously damaged the surface or heads, does the spare area have free room for reallocation, etc.) During that time, the hard disk is usually not responding, the system (or at least software/OS trying to access the affected drive) seems frozen.
After the procedure completes (if things go fine), the original location is then (internally) marked as bad and all further read/write operations pointing to the original location is then redirected to the spare area.
So when the operation is completed, the original (bad) area is not accessible by software any more. Even re-install or complete re-format (or "low level format") will not show problems because the original bad area is not used any more. That's why in this case software (for example scandisk but even the Disk -> Surface test in Hard Disk Sentinel) will not find and report problemmatic sectors.
However, the reallocation process should not be ignored. If the drive status is stable (no further sectors will turn to bad) and the number of reallocated sectors is relatively low, then the drive can be used because the problematic area is no longer accessed.
However, higher number of reallocated sectors mean more damages of the surface - and this usually create even more and more reallocated sectors which all risk data loss and cause system instability issues.
You may find more information at
www.hdsentinel.com/smart (for example in "Bad sectors?" topic)
