When to aerate will depend on your location. In the South lawn aeration should be done in the spring, as soon as the soil thaws. In the north the fall is better time to aerate.
You don't need aerate every year. Aeration should be used mostly to reduce soil compaction. Aeration can also be used as a method to relieve thatch.
There are two types of aerators, using a spiked aerator is a less harsh method than using a core plug aerator. When using a core plug aerator, it can be helpful to water the yard the night before.