whats the difference between æ, and ae?

Answer 1

The two are OFTEN, but not always, equivalent.
For texts in English, "ae" is indeed a substitute for the ligature æ", but that is not its origin in every case, nor may æ be substituted for every instance of "ae".

1) the LIGATURE "Æ" may be used for certain words derived from Latin or Greek. But is is now common to substitute "ae" in these cases, or even to update the spellings completely, yielding, for example, "encyclopedia" for the older "encyclopædia".

2) Since English does NOT use the umlaut SIGN (of German), English texts using German words with umlauts revert to the original custom of adding an e after the letter: ae, oe, ue (instead of ä, ö, ü.). But the æ - ligature is NOT a permissible subsitute here.
http://en.wikipedia.org/wiki/Umlaut_(diacritic)
http://en.wikipedia.org/wiki/%C3%84

If we move to other languages the situation is much more complicated. In a number of languages (e.g., Danish, Norwegian, Icelandic) æ marks a distinct sound, and is it fact its own letter, no longer simply a ligature.

In OLD English æ was used to represent a distinct vowel very close to that in Modern English "cat". In fact, the ligature is now used as a distinct symbol in the International Phonetic Alphabet, top represent that sound

http://en.wikipedia.org/wiki/%C3%86

Note that very similar things are true for the o-e ligature (), though in American English this ligature is far less likely to be used at all; "e" is now generally found in its place.
http://en.wikipedia.org/wiki/%C5%92

Answer 2

Typesetting; they're the same.