Anti aliasing is a method to overcome the high limitation of screen resoloution by blending different, usually computer generated, arrays of colors to create, at a distance the illusion of form. the result isnt as clear as carefully aliased images but it does imply a greater amount of detail. To anti alias requires a higher depth of color. If you look at some of the icons in 16 bit color you will notice they are slightly more jagged.
Anti aliasing uses an approach where by instead of using the exact color you average every pixel with the ones surrounding it by adjusting its color values.
This is used for the rendering of vector graphics to smoothe cropping and also a method of rezising images.
I find Photoshop uses some of the best anti aliasing techniques and that other Image editors just blur the image to much or make it too jagged. Flash may seem bad in some instances but thats only because it uses faster rendering techniques for instant display on slower machines which results in poorer anti-aliasing. It is for this reason that you often find people importing bitmap fonts into flash.
