What is my multimeter measuring when in AC mode?
Since this is a cheap DMM, I suspect that it is not true RMS.

This is an expensive feature to do properly.
Most people won't care.
The specification doesn't list a crest factor for which the specification is valid.

If you have a function generator, you can run tests to determine if it is true RMS. Measure various waveform types and compare with the table below. Use 100 Hz, a typical meter is only accurate from about 50 Hz to a few hundred Hz. I used a peak voltage of 5 Volts, you can adjust the table if you can't get this from your function generator, I have provided the formulas.
Next, realize what an average reading meter will do. First, it will calculate the average of the absolute value of the signal. Then, it will assume that the signal is a sine and multiply the average by a correction factor.

With show formulas enabled:

My Fluke 111 reads 3.544 Vrms, 2.894 Vrms, 4.997 Vrms for sine, triangle, square respectively. All are within 0.3%.
You can find the average and RMS factors on the internet, or you can derive them if you are good with calculus.
Many (most?) meters will AC couple the signal with a cap if you are on the AC setting. My Fluke 111 AC couples, removing any DC offset first.
A good quality true RMS meter will always specify the crest factor that the measurements are valid for. https://en.wikipedia.org/wiki/Crest_factor