A few months ago I spoke about signal pathways in the studio, an entity that may frighten an audio novice, but contrary to belief makes sense with time and application. Most studio and MIDI interface users are familiar with the exploit of auxiliaries and inserts, nevertheless it is important to distinguish between the two, as I regularly see studio users mistake the two leading to major connection errors and ,shall we say, un-altered audio.
Essentially, an insert diverts a (selected) signal and applies a chosen direct effect, for example, EQ, gate, compressor, flanger (dynamics). This signal is therefore changed by this effect and then returned to the channel with its effect added. Auxiliaries on the other hand are a slightly different kettle of fish. They usually come after an insert on the signal path (if you have used one, that is), and takes two simultaneous pathways; one with the original signal and the other an aux. Signal.
An auxiliary works as a bus and can host signals from other channels therefore the same effects can be added to several channels, for instance, a reverb or delay. This aux. effect has to be treated like any other bus, thus, the level of the signal being sent to the effect has to be controlled. The resultant signal is the direct (original) and aux effect together.
Taken from: http://music.tutsplus.com/articles/encyclopedia-of-home-recording-auxiliary-send–audio-13423
Once you have got the hand of how there fundamentals work towards diverting and splitting signals half the battle is won; the fun bit is using them to your advantage. A good example is in post production where several channels can be aux. Sent to a reverb unit to provide an acoustic environment for the actions on screen.