How does an LC network filter power?
At high frequency the impedance of the inductor increases and the impedance
of the capacitor decreases. For high frequency signals most of the signal voltage drop
is across the inductor.

The VCC (in a properly designed system) will have a very low impedance. By raising the impedance between VCC and AREF the capacitor will reduce more of any high frequency
noise that is on VCC. 

On my boards I use a 10-20uH inductor and 0.1uF capacitors.

[corrected the first paragraph mistake that leon commented about]