Hi, in my understanding, AA takes away the 'jaggies' making text edges smooth. In images it can create a halo effect around some objects, it also makes an image appear larger due to the fact that AA also increases the amount of colour pixels - probably why images appear less clear.
When to use AA, hmm, not so easy, I guess that would be down to individual preferences. Perhaps someone else can give a better explanation. But I hope this helps.