James’ answer is good! To put it another way, turning AC mode on is removing any slow moving content from your modulation source. It’s a high pass filter with its cutoff at frame rate.
With a positive DC biased signal (like 0-1V video) the signal is always additive. If you add it to a mix, the mix becomes brighter. If you subtract it from a mix, the mix becomes darker. You are modulating brightness.
When you AC couple this signal, rising voltages will add, but falling voltages will subtract, since the relative DC offset (gray level) is gone. This gives the behavior with the modulation source adding brightness when it rises and subtracting brightness when it falls. In other words, you are now modulating contrast.