NO. AO is not to compensate for bullet drop whatsoever. When you look down a scope, have you noticed you can move your head/eye and the target don't move even though your line of sight is not parrallel with the scope. Well when you get out to long ranges >200 yards, these slight head movements will make your abjective (target to not be where it appears in your crosshairs). AO helps to compensate for this by making the scope pararllax free. Most all scopes unless otherwise noted are factory set to 150 yards. So the maximum error for a typical VarII is 8/10" at 500 yards. Most shooters will never know the difference. And as long as your eye is perfectly parrellel with the scope (impossible), you will never have to worry about that 1000 yard shot.

To quote Leupold's home page:
Parallax is essentially an optical illusion. It is the apparent movement of the target relative to the reticle when you move your eye away from the center point of the eyepiece. It occurs when the target does not fall on the same optical plane as the reticle.