The QT AC3 Codec solves issues that you may have with audio in AVI video files, particularly if you find you can't play AC3 files.
Even if AC3 doesn't sound familiar to you, you definitely have used it before as it essentially is Dolby Digital. AC3 is the sound version that you commonly find in AVI, DivX 5.2.1 and XviD files. The technology has evolved extremely quickly over the last few years though and you probably won't have as much trouble playing AC3 files than before. This and the fact that the latest version of Quicktime fully supports Dolby Digital, makes the QT AC3 codec a little obsolete. However if you are running an older version of Quicktime you might find it handy.
The component is very easy to install and once set up works automatically with Quicktime without you having to worry about it. This is why, if in doubt, I suggest to install it, as at least you'll be guaranteed that any AC3 file will work.
The QT AC3 codec ensures you have no trouble playing Dolby Digital audio.