Anti-aliasing is a technique for smoothing out jagged edges of diagonal or curved lines in computer-graphics.
Images on a computer screen are made up of pixels, and when these are in a straight line, they have straight smooth edges, but when they are placed at an angle or curve they can appear jagged. Each pixel of a digital image can only be one color. There wouldn't be a problem if pixels were infinately small 1,000,000,000,000,000/screen, but unfortunately they're not. They're between 250,000 - 1,500,000 depending on screen resolution. At regular pixel size, an image's smooth line edges often appear jagged.
Anti-Aliasing creates an illusion of "blending" by placing similarly colored pixels next to one another fooling our eyes into seeing smooth line edges.
But this advantage to making crisp curved images has 2 downsides: ò Anti-aliasing increases the file size. Compression only handles solid color blocks whereas anti-aliasing adds extra colors to the palette. ò Anti-aliasing can create the "fringe" effect. When you anti-alias an image, its edges are blended with their adjacent colors, so if you change the adjacent color (the background color for example) then you will see a fringe around the edges of the anti-aliased image. The "fringe" effect only happens after you try to change the background color of an image that has already been made and flattened. If you are still in layered mode, then you can change the background color on a different layer, and you won't see the "fringe" b/c the anti-aliasing is still an alpha transparency, and not a gradient.
Anti-aliasing is not to be confused with dithering:
Dithering is a process in which differently colored adjacent pixels are used to simulate colors and shades that do not actually exist in an image's color palette. In order to display a full-color graphic image on a 256-color monitor, computers must simulate the colors it cannot display. In effect, dithering "fools the eye" into seeing colors that aren't really there. Whereas anti-aliasing uses similar colors to blend the images edges to make it appear as if they are smooth and not jagged.