Anti-Aliasing "is the technique of minimizing the distortion artifacts known as aliasing when representing a high-resolution image at a lower resolution." (quote from Wikipedia: http://en.wikipedia....l_anti-aliasing).
Here is an example of anti-aliasing in Minecraft. If you look closely, the left side (not anti-aliased) has it's block's/cube's edges rugged and you can easily see the pixels but in the right side (anti-aliased), you can tell that the edges of the blocks/cubes are very smooth:
RESIZE IT SO IT'S LARGER, THE DIFFERENCE IS HUGE!

In simple words: it makes things look smooth and sharp instead of it look rugged.
If you look at your Minecraft world from a distance you'll notice that the blocks/cubes that make up the game are quite rugged and not smooth. Anti-Aliasing would easily fix this and it would make the game look MUCH BETTER.
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