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Aeration punches holes through the thatch layer and removes small plugs of soil. This increases the surface area of the lawn, and promotes exchange of gases with the atmosphere. This in turn promotes the population of aerobic microbes in the soil, who need oxygen as they break down organic material in the soil.
Most lawns only need aeration when compacted soil becomes a problem. They don't need to be aerated twice a year. Soil compaction can become a problem if your lawn receives a lot of foot or vehicle traffic. The problem is likely to arise sooner if you have a soil with lots of clay. Soils that are sandy and richer in organic content do not compact as easily, but they too can become compacted if the traffic is heavy enough. If you have problems with nightcrawler mounds and irrigation water seems to run off rather than percolate into the soil, compaction may be the problem and aeration may be called for. If you cannot shove a large screwdriver into the soil on a relatively dry day, aeration is probably warranted. Have your lawn aerated only in the fall. Spring aeration exposes a lot of bare soil to warm season weed seeds like crabgrass. For best results, follow the aeration with a light topdressing of compost, spread no thicker than 3/8" thick (1/4" or less on hybrid bermuda lawns).
If you have a pair of golf shoes, you can wear them as you work in the lawn. Golf shoes don't actually aerate the soil, but they do punch holes in the thatch layer, allowing greater movement of water, air, nutrients and pesticides. The holes also allow soil-dwelling microbes to propagate and get to the thatch, thus speeding breakdown and delivering more nutrients to the soil.
Fall is usually the best time to aerate. The reason for this is that aeration usually exposes a lot of soil. Doing so in spring means exposing soil to warm season weed seeds like crabgrass. Crabgrass needs both heat and light to germinate. Once it does, it can quickly dominate a lawn with so much bare soil to work with. Crabgrass and other warm season weeds typically die off with the first frost. If you aerate in the fall, you may still get some warm season invaders, but the upcoming cool weather will take care of them.
There are two types of aeration devices, the spike aerator, which punches holes in the sod without removing any soil, and the plug aerator, which removes small plugs of soil (about 3/8" thick and 1-1/4" long) and lays them across the lawn. The plug aerator is preferred, but the spike aerator is better than nothing if aeration is needed. If aeration is not needed, the spike aerator can actually make compaction worse because the holes are created by displacement and forces soil to the side rather than removing it. If you use a spike aerator, the aeration needs to be followed immediately by a topdressing of compost or peat moss. If you use a plugger, you need not topdress, though it does help.