How it works
An APK (Android Package) contains the compiled code, resources and manifest, and can be installed directly, which is how sideloading and most other stores work. An AAB holds everything for every kind of device; Google Play splits it into APKs matched to each phone's screen density, processor and language, so downloads are smaller. Since August 2021, new apps on Google Play must be uploaded as AABs, which also means using Play App Signing.
An AAB cannot be installed on a phone directly. bundletool, Google's command-line tool, turns it into installable APKs for testing, and Play's internal testing track does the same in the cloud. Debug builds for your own devices are still APKs.
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