What is the purpose of an AAE file?
According to several sources this feature was introduced with the launch of iOS 8 and OS X Yosemite (now macOS Yosemite).

The AAE file format is proprietary, which usually means that only Apple, and Apple-approved, software can interpret the contents. Some cross platform apps that can take advantage of the AAE format are Lightroom and Photoshop. However the file appears to be a regular XML file.

A sample file for a slow motion video would look like this: https://pastebin.com/raw/1r8416rm

The data tag is encoded with base64 and, when decoded, contains a property list (.plist) formatted file that looks like this: https://i.imgur.com/CYPVcTO.jpg

Simply put, an AAE file contains information that specific apps can use to apply effects to photos and videos based on edits that a user makes in the iOS Photos app.