AOV Composition allows opacity and transparency to carry forward into AOVs. It works only for RGB AOVs, so you won’t see it in the render region (because the xsi display driver always outputs RGBA AOVs).

For example, suppose you have a textured grid with an opacity map:

In the render region, the Main AOV is fine, but the Arnold Direct Diffuse doesn’t have the opacity, even if you enable AOV Composition:

However, if you render out the image (with AOV Composition enabled and the Direct Diffuse format set to RGB), you’ll get what you expected: