I think he was under house arrest. Look at the overall picture:
He was situated near an army base (the better to keep control of him or tabs on him)
He apparently *never* left the house for several years (according to all reports)
He lived in a kind of squalor (judging by the pics of the inside of the house)
He had no real contact with the outside world aside from broadcast TV & radio
He was trotted out from time to time to make propaganda videos
He had a large crew of people living in the same home (guards or minders, mostly)
I think Pakistan was afraid of him being caught and so they kept him in the house, on ice, so to speak.
Think about it....he lived in a a town full of retired military personnel, right down the block from Pakistan's elite military academy...basically their version of West Point. He was 1/2 mile from the barracks Seriously, how could they have not known?
The Pakistani president said that the military and secret police were "too smart" to do something like hide him right there in sight of the military barracks. But at the same time they were too dumb to know he was there?
I think they knew he was there. I think they put him there (kept him there) so as not to have him running around loose and in danger of being caught.