What does "Auto Freeze" mean?

I have a setting in my device called “Auto Freeze”, by clicking on the snowflake in the apps list. I also have a setting in Settings->Application->“Auto freeze newly installed Apps”.
I can’t tell what either of them does.

It temporarily close the apps running in background to promote battery optimisation and ram consumption.

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So the ones you mark auto-freeze get closed? or they trigger closing of other apps? When does this “temporarily close the apps” happen?

Yea, the one you select will get auto freeze. It just prevents the app running background when the device is idle like sync, backup,.

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Android keeps apps running in the background when you switch away from them, in order to minimize loading times when you switch back (also to enable certain types of monitoring of events to be performed by applications which can’t be done if they’re not actually running).