1.

What is the architectural difference between AE and AAE

Does the same AE behaves as AAE at runtime when we configure ICO ?
AAE is the new name for AE

>>>2. Do we have to install AE and AAE separately on different instances/boxes??

as mentioned above - if you have ICO in ID then you have AAE already so no need to install anything new

@1: Actually, AAE is a different way to use the Adapter Engine, that was introduced as of PI 7.1. And yes,
when you use ICO, same AE behaves as AAE.
@2: No, the AAE is the same thing as the AE, the only requirement is PI version 7.1 or higher.

AAE has some distinct advatages over Adapter Engine.

AAE has additional features over AE, like Local Processing of messages using Integrated Configuration.

"Advanced Adapter Engine provides mapping and routing for this locally. Message Processing is only
executed on the Advanced Adapter Engine from one adapter to another without the involvement of the
Integration Engine so it will impove the performance .

SAP has a stratgey to move SAP PI in to single stack hence the pipe line stpes part of IE started moving
to AE from PI7.1
Now we have two different products(PI7.3) JAVA Stack PI and Dual stack PI.
when ever you change configurtaion in Integration directory to ICO then AE behaves as a AAE.

PI 7.11 EHP onwards (Proxy adapter scenarios can be implemented in local processing or adapter
engine itself)

PI 7.3 onwards (IDOC, HTTP)

Still if you want to implement WS adapter scenarios, you need to depend on IE processing or classical
processing.
Persistence Steps: The advantage of local processing using (AAE ) vs classical processing (IE) is that we
can avoid number of persistence steps in the local processing in AAE.

. the scenario using SAP PI 7.1 DUAL STACK using AAE the scenario SOAP to RFC the time to
request/response 315ms
With SAP PI 7.3 AEX - Single stack java - was 65ms.
I did test with 1000 msg with 16 threads
Asnwer yours questions:
1. What is the architectural difference between AE and AAE
AE using integration server its means pass thrull the full pipeline and you lose in performance.
AAE some adapter works, depends of your system SAP PI 7.1 / 7.3 or AEX.

2. Do we have to install AE and AAE separately on different instances/boxes??

No, if you install SAP PI 7.1+ dual stack you will have acess to develop scenario with AE or AAE you
make choose.