So Tim of Gothridge Manor pointed out some details on the Light spells. Including this tidbit found in Old School Essentials
Reverse: Darkness, creates a 15' radius of magical blackness. It prevents normal sight, but not infravision. It can be used to blind creatures or to dispel a light spell. .I went to the copies of B/X I bought and sure enough it is the same.
In OSE and BX both Dwarves and Elves have infravision. This means that Dwarven allies or Elves themselves can cast a Darkness spell. This results in the Dwarf or Elf being able to attack normally if they are inside the darkness spells but everybody is attacking them as if they have been blinded. In DnD B/X blinded creatures can't attack.
For reference here is ODnD take on darkness found in the Greyhawk Supplement