Daylight brought into an area of magical darkness (or vice versa) is temporarily negated, so that the otherwise prevailing light conditions exist in the overlapping areas of effect.
The party is in a cave, and their foe has cast Darkness on a stalagmite to shroud the area in magical darkness, allowing the foes to Hide, even versus darkvision.
The party has Daylight cast on someone's weapon when entering the area, thus the resulting light conditions would be the "otherwise prevailing light conditions" inside Darkness' area, so the normal darkness of a cave. Those with darkvision can see in it just fine.
The situation that came up was that someone then activated the Daylight property on their armor... With a second Daylight effect, neither of which were used to dispel the Darkness, what would the resulting light conditions be inside the area of the Darkness spell? Normal absence of light, or the effects of Daylight?