The PFO is one of 26 Criminal Organizations you may encounter, and appears in both the European and Africa/Middle East Theatres of Operation. Since no known real-world terrorist organization used the initials "PFO", it is assumed that this is an allusion to the "PLO", the Palestinian Liberation Organization.
In the GameEdit
The PFO is regarded as a Criminal Organization.
The PFO appears in two Theatres of Operation: Europe and Africa/Middle East. In these Theatres, it will have a Hideout in almost every City, though the location of each Hideout may not be known at the start of each Mission.
You may occasionally encounter PFO agents Participating in Criminal Plots. It is also possible for the PFO Mastermind to be the head of such a Plot, and if so that Mastermind must be Arrested - as with all 25 other Masterminds - in order to complete the entire game.
There is no fundamental difference between any Criminal Organization, and the PFO is no exception.
The game lists this faction as being named the "PFO". No real-world terrorist, criminal, or state-security organization of that name has ever existed, leading to the assumption that this is an allusion to the "PLO", the Palestinian Liberation Organization. This keeps in line with several more-obvious allusive organization names used in Covert Action.
In 1947, the United Nations agreed on a plan to partition the land of Palestine, previously a British Mandate territory, into separate Jewish and Arab states, in an attempt to resolve decades of violence between these two peoples. In response to the plan, the Arab population rose up to make a last-ditch effort to terminate any prospect of a Jewish nation in the region. After the State of Israel was declared in 1948, all neighbouring Arab states declared war on this new state. Remarkably, not only did the State of Israel survive, it acquired more territory than would've been alloted to it under the U.N. partition plan. During the war, the majority of Arabs previously residing in the areas conquered by Israel fled to other Arab states, in the false hope that after they'd win the war, they could return safely to their homes - now inside the State of Israel.
The remaining territories of Palestine were quickly annexed by the various Arab states. Although a fickle cease-fire had been signed between those states and Israel, the Palestinians refused to accept Israel's existence and dominance over what they considered their own land. Groups began to form in the interest of undoing Israel's creation and returning the land to Arab hands. In 1964, less than two decades after the war, the Palestinians created the PLO as the formal entity to carry out this venture. Their efforts escalated when, during the Six Day War of 1967, Israel took control of the remainder of Palestine, creating what is known today as the "Occupied Territories" of the West Bank and Gaza from Jordan and Egypt respectively.
The organization was self-characterized as a nationalist, socialist and secular liberation movement. Although it maintained (and still maintains) its place as the primary political authority of the Palestinian people, the PLO was also committed to armed struggle against Israel as its primary means of achieving its political goals. Unable to form an actual standing army (as it had no state or means), the PLO instead chose to being a decades-long campaign of terrorism against both Zionist and Western targets.
In practice, the PLO is more of a coalition of several distinct factions, each with its own methods and self-imposed boundaries, working more-or-less loosely together towards a common goal under a mostly-consensual leadership. The vast majority of these groups, however, have instigated terrorist attacks both within and outside Israel to further their ultimate goals. Fatah, the leading faction in the organization, has been responsible for several massacres and airliner hijackings, and its splinter-group the Black September even carried out an attack on the Munich Olympic Games in 1972.
The leadership of the PLO has been forced to migrate frequently during the first 30 years of its existence. Firstly they were evicted from Jordan following their attempts to gain control of that country. They moved to Lebanon and carried out attacks on Israel across the border, until in 1982 an Israeli Invasion succeeded in exiling them to Tunis.
By 1990, the year Covert Action was released, the PLO had lost some of its fearsome influence due to its leadership being stationed so remotely from its populace. Nonetheless, it had just completed several years of uprising known as the first "Intifada", which eventually convinced Israel to negotiate with the organization for a permanent solution. In 1993, Israel and the PLO signed a somewhat-tentative peace treaty which lead to the creation of the Palestinian Authority - an interim government responsible for civil affairs in the Occupied Territories. Unfortunately for all sides involved, this fueled the creation of fundamentalist factions within the Palestinian population - specifically the staunchly religious "Hamas" movement, which escalated attacks against Israel to new levels of violence, won an election against PLO leadership, and is currently in control of the entire Gaza Strip, acting as a separate governing body in that region.
Today, while the PLO (or rather, the Palestinian Authority which it controls) still has significant authority over the West Bank, its negotiations with Israel for a permanent solution to the conflict are at a stale-mate. Nonetheless, the first decade of the 21st century has seen the PLO abandoning the use of terrorism in favor of international political pressure. It remains to be seen whether a solution will be found before the organization returns to its more violent roots.