As far as what "AC" is insofar as what the mechanic does:
At character creation there are 4 classes you can choose depending on what faction you want.
Close to the beginning of your class story (around level 10 for most) you will get a quest to choose your Advanced Class. (shortened by many as AC)
Choosing your AC also opens up 3 skill tress.
Leveling beyond 10 will give you points to place into the skill trees however you want.