What happens if I see people I know at aa?

Say hello. They are there for same reason as you, to help treat their disease of alcoholism, they are very likely thinking same thing as you, very common fear. Niether one of you would want someone else to know. Quite possibly you will form a great bond with that person. It's does happen you're not the only one you know with the disease.
Happens all the time. Depends on who you are and who they are. It can be embarassing, and many people choose to go to meetings at a distance from home where they are less likely to run into people they know. If you are embarassed by being there, they are likely embarassed too. However, there is nothing to be embarassed about in getting help. What happens at a meeting is supposed to stay at a meeting.
If it feels akward. I suggest acknowledging them. That way your possibly mutual discomfort doesn't become the elephant in the room that no one wants to talk about. Every one is there for the same reason, as humbling as it may be. Take care.