AUX files are used in older Esri products in the ArcGIS suite to specify coordinate reference system information. They have the extension ".aux". You may want to generate Esri AUX files if your imagery will be used in Esri ArcGIS 9.1 or earlier.
To generate Esri AUX files:
Use the -eaux switch while encoding an image. For example:
mrsidgeoencoder -i foo.tif -o foo.sid -eaux