Aggression is an internal game attribute for NPCs which determines the Disposition level at which an NPC will attack. If the NPC's disposition towards you or any other NPC drops more than five points below the NPC's aggression, the NPC will attack. NPCs with an aggression of 5 or less will never attack, and NPCs with an aggression of 0 will never fight, even in self-defense. NPCs with an aggression of 6 or more will attack you if their disposition is lowered enough. NPCs with an aggression level of 106 or greater (achievable only through the Console or frenzy spells) will attack anyone they see, regardless of disposition.
Aggression and Disposition determine combat for the game. Hostile NPCs and creatures, such as bandits and wolves, always have a low disposition towards you along with high aggression, causing them to attack. Other NPCs and creatures that may attack, such as highwaymen (will not attack if paid) and Mythic Dawn Agents (will not attack until later on in the Main Quest line) will have disposition and aggression changed to determine their likelihood to attack.
In many cases, an NPC's aggression is fixed; most changes in an NPC's behavior result from variations in disposition, which is changed by many factors during gameplay. However, scripts that cause an NPC to suddenly change in behavior will often implement the change by modifying aggression.
Since NPCs decide whether or not to accept a Yield based only on disposition, changing the aggression allows an NPC to attack without refusing a yield. On the other hand, disposition is used where aggression could become unstable or would not make sense, e.g. a Guard with a Disposition of 80 toward you would attack the whole town if their aggression was raised that high.