It’s just a service where an email address “forwards” to another email address with the stipulation that both are hosted by the same company.
Example: you are [email protected] as the “real” email address, but you can also create [email protected] and they’re actually the same mailbox. Mail sent to either one ends up in the “real” joe mailbox, so you only have to login to one mailbox.
On a personal note, yes, I make a unique alias for every single thing I sign up with. It’s a bit annoying, and when some company employee IRL asks me for my email address I just refuse because setting up an alias is obviously impractical and I’m not doing it. In exchange, if junk mail starts showing up, I know who had a data breach or who sold me out, and have the option of calling them out or deleting the alias.
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