It is a low-pass power-supply filter intended to keep any spikes that might be on Vcc from appearing on the Atmega's VCC pin. The series inductor presents a high impedance by resisting a sudden change in current flow through it. The shunt capacitor resists any sudden change in voltage at AVCC.
And after simulating it, it is a piss-poor filter, because the damping is way too low. Look at the attached plots. I compare two "improved" versions to the original. Note that the vertical scale of the AVCCn plots are not the same.
AVCC2 looks the cleanest, but requires a large inductor. AVCC3 is not bad, but degrades the voltage regulation. AVCC1 (the original) is horrible!
i understand that R1, R2, and R3 simulate a load, and V1 is a poor voltage source, but i still do not understand what the graphs of avcc1, avcc2, and avcc3 say about the filter.
The goal is to provide "pure" DC to AVDD. For example, suppose your Atmega chip has an AnalogDigitlalConverter inside it. Chances are that AVDD could be used as the reference for the ADC, meaning that any noise on it will contaminate the AD conversion, or possibly perturb internal registers and clocks. The less that AVDD changes due to external noise; the better. So the peak-to-peak voltage variation of AVDD is a quantitative means of comparing different methods of filtering the voltage applied to the AVDD pin.
asc file is attached.