I drive in open testing sessions a lot IRL. If I get the blue flag, all I do is lift on the next straight. Just lift for a one-onethousand a little ways after your turn exit point, flash your indicator and let the dude by. Don't go off-line. The passer has to get by YOU, and he has to know what you're going to do, so be predictable. Just make it easier for him by lifting. Don't touch the brakes. This will freak the guy out.
In a real open session, usually the only rule is to not pass in corners, and to not press the pass if you're not alongside in the braking area. If you're only halfway alongside, abort the pass. Sometimes in real life the driver will see you with just a nose in, but he definitely won't in a game since we're all on very restricting monitors.
Usually the track coordinators will leave it up to the passing car to get by, and they won't issue blue flags. In these situations, if you're not exiting the corner faster than the other guy or don't have monumentally better brakes, just lift, take the pits, whatever you need to do to get space. It's amazing how many professional drivers will just sit there on the tail of a guy for laps and laps hoping he'll let them through. Just drop back, get space. You're talking about 10 or 20 cars sharing 2.5 or so miles of track space. There is enough for everyone. Don't feel cheated if someone won't let you by.
Anyway, being passed, just lift, or short shift, or something, on the next straight. Don't, whatever you do, run wide on a corner. You usually have no idea how many cars will come through, and very very few of the guys out there have ever really learned how to manage traffic safely.
The best way to pass is to get a better run out of a corner. This is very hard to do when the car ahead of you is the same type. It's also hard to do when the car ahead is very slow. The slower the car ahead, the more room you need to get a run through the corner. I can't even tell you how many kid karts I've overtaken from 10 or 12 kart lengths back just by getting a run through a corner.
The second best pass is under the brakes. Maybe you're in a Formula car with very good brakes but low horsepower and you want to get by a GT car. Brakes are your only option. When passing under the brakes, it is best not to throw it in deep. Brake at your normal point, just lighter. If you're not alongside by the turn-in point, abort.
The safest outbraking pass is done close to your opponent. You NEED to make sure they see you. The bigger you are in their vision, the less inclined they will be to turn in on you. If you throw in a pass and you're 2 car widths to the inside, he'll just turn in anyway, you'll have to slow a lot to make the corner for not opening your exit, and he'll probably hit your rear.
Leave half a car width between you, get up there, get alongside and dictate the corner to him.
The only provision to that is if you're a Formula car and he's a GT car, don't get too close, otherwise he difninitely won't see you; you're smaller than his door frame. But, a Formula car can hugely outbrake a GT car so it's not that big a deal. You should be well in front of him by the turn in anyway. Just be aware that you're small and he is big and probably can't see you till you're in front.
Open passing is very much no-man's-land. The first day I ever did an open session, I got beaned by a very experienced guy. I slowed, took the final corner slowly (cooldown lap), he assumed I'd go wide, I turned in, he came down full speed, we whacked wheels and broke each other's steering arms.