Ok, there are TWO settings. "Auto Age (Played Sims)" and "Auto Age (Unplayed Sims)"
When you look at one of your towns, populated houses will have a circle with a plumbob above it. If the Plumbob is bright green, then that is considered a "Played" household. "Played" doesn't refer to a household you are "currently" playing. It refers to ANY household that has that bright-green plumbob. Houses get that the instant you go into that lot in "play" mode. Even for a second.
"Unplayed" households are all the others with dim Plumbobs. You can remove them from being "Played" by using the household manager. Just view the household and click on the green plumbob. It'll turn dim and it'll be no longer "played". You can still go back in and play them, which will turn the plumbob bright green again.
By viewing households in the manager, you can see which ones are "played" and not.
Now, those two settings. Auto Age (Played Sims) has three settings:
Yes - This will turn on auto-aging for ALL "played" households. (even if you aren't actively playing them)
No - This will turn off auto-aging for ALL "played" households. (even if you aren't actively playing them)
Active Only - This will only turn on auto-aging for those "played" households that you are currently playing in "live" mode. If you aren't actively playing the household, they won't age.
Auto Age (Unplayed Sims) only has a checkbox. They refer to any household with the dim plumbob. You uncheck it and any household with the dim plumbob will not auto-age.
That's how the vanilla game works. However, if you have a mod like MCCC, ALL that changes. MCCC can change how all of that works and makes the entire system a LOT more complex.