Auto Layout helps in creating scalable responsive component which are much easier to use with less manual tweaking. It much closely resembles to Flexbox layout in frontend development. It increases productivity by saving some redundant efforts by designers.
Figma has auto layout since late 2019, but it has some usability issues and dirty bugs which required hacks to tackle with. E.g. Reverse layer order issue, more details https://forum.figma.com/t/auto-layout-reverses-the-order-of-my-layers/1190/2
In May 2022, during the Config event Figma's CEO announced a major redesign to the Auto Layout system to fix issues like this and improve User Experience.
Here are some important takeaways from the events regarding Auto Layout:
1. Layer order in the Layer panel is now in sync with order in which it is displayed in Canvas. A long old bug finally fixed.
2. Spacing highlighted view is added to show the spacings between elements in auto layout.
3. Scrub spacing right in Canvas to adjust spacing between elements without going to Properties Panel. Love it.
4. With Properties Panel update now Fill and Hug settings are closer to element dimensions. Also, updated Auto layout panels.
5. Here comes one of the most requested feature in Figma: Absolute positioning in auto layout. This was possible previously using some hacks, but now it is much simpler to use.
6. Negative spacing in auto layout. Just scrub the spacing in Canvas and keep going in negative direction, until elements starts stacking over each other.
Here is the full video of Figma Config 2022, in case if you want to explore all the new updates to Figma in 2022.
