OSGi is a fundamental element in the technology stack of AEM. It is used to control the composite bundles of AEM and their configuration.
OSGi "provides the standardized primitives that allow applications to be constructed from small, reusable and collaborative components. These components can be composed into an application and deployed".
This allows easy management of bundles as they can be stopped, installed, started individually. The interdependencies are handled automatically. Each OSGi Component (see the OSGi Specification) is contained in one of the various bundles. When working with AEM there are several methods of managing the configuration settings for such bundles; see Configuring OSGi for more details and the recommended practices.