the rules of how an intestae estate is divided in Scotland is contained within the Succession (Scotland) Act 1964.
To answer the question directly, 'yes', the child of a predeceased sibling does 'represent' that predeceased child - i.e. the child gets the share that the deceased sibling would have been entitled to - by exercising their 'Legal Rights'. If that predeceased sibling had three children then each child gets one third each of their deceased parents share - also one third.
However before you get to the stage of dividing up the property between siblings all the deceased's debts must be deducted from the estate. After that, if there is a surviving spouse, then the survivng spouse can claim 'Prior Rights'.
Often this exhausts the entire estate leaving nothing for any other potential beneficiaries. Prior Rights gives the surviving spouse the right to the dwellinghouse where he/she was ordinarily resident (up to �300k). The surviving spouse is also entitled to cliam rights to the dwellinghouse furniture (up to the value of �24k), and finally, he/she is entitled to a cash right of �42k where there are surviving children.
So the estate must be fairly large before any surviving children (or their representatives) may receive any residue from the estate.