Well, their mechanism is quite simple. They take your claimable rewards from staking pools, and reinvest them into your staked principal, so that you can earn interest on your interest, which can build up to quite a significant extra sum over time. In addition, they allow you to avoid the tedious task of manual claiming, saving you not only time but gas fees too, which auto-compounding vaults aggregate among all stakers in the pool. As a result of these benefits, auto-compounding vaults are very popular in DeFi; yet, they’re a type of very basic product, one on which Alpaca has improved upon.