AA = Anti Aliasing, its a graphics option that attempts to reduced jagged edges to objects to make edges less "stepped" etc
Take a look at this image to see the "staircase" effect on the cape:- this is the jagged edge we look to reduce.
What anti aliasing does is to try to try to re draw a low resolution image to try to look as it would if it were rendered at high resolution. by choosing to fill different pixels etc however the smallest element it can fill down to is a single physical pixel, which is where pixel pitch and type comes into play.
Ok now to show how pixel pitch can effect it heres a comparitive scale example of how the physical size of a pixel can effect the appearance of these jagged edges.
first we have a pair of diagonals made up to represent .40 pixel pitch and next we have the same diagonals made up to represent .20 pixel pitch. You can see how the edges of the physical pixels are so much larger and more noticeable on the 0.40. This is where big LCD screens fail... 0.20 is around the pixel pitch of a high end 19" CRT running at 2048x1536 - CRTs have an ability to shrink or grow the pixels with varying resolution, running that 19" monitor at 1280x1024 you will probably be looking at a pixel pitch of around 0.25-28.
A 1680x1050 22" LCD monitor would have a a pixel pitch of around 0.285 a 20" lcd would have a pixel pitch of 0.258 the difference is quite noticeable.
However the size of the pixel alone isnt the only thing that hurts lcds when it comes to jaggies, the shape and definition of the pixel doesnt help them either a LCD has inherently square edged pixels exagerating further the jaggies, CRT's pixels are made up of groups of rounded of triangles. A group of these triads make up a single "pixel" the number of triads per "pixel" is varied depending on the resolution the screen is running at. Due to this and the way phosphor dots glow very differently to the pixels in a lcd screen gives objects a smoother edge naturally.
However if you're running at 1280x1024 you are going to be looking at fairly large pixels already, apparantly without bothering you too much. Its a matter of taste really I hate jagged edges in games, really really detest it. so a 22" lcd screen would be a disaster, 20" lcd is barely tolerable, but thats just me.