C1 "injects" AVCC-GND dV/dt current into the left hand leg.
If AVCC jumps up, then top rack current increases and that
helps pull the pass FET gate along for the ride. Somewhat.
Or over the top, depending on the "tune".
Now to me the circuit looks incomplete, the left side of the
diff pair has no signal indicated on its gate (that I can see)
for the VRef input. Also no bias for the bottom rack other
than the diff tail through-current and that "mirror" is malformed
(both sides D-G connected, so where's the current difference
supposed to come from?).
If pass FET is big then you probably need a buffer stage to get
decent load step response. The pass FET might "soak up" any
perturbation to the control amp. You can expect no help at low
supply frequency, this is a HF PSRR tweak "counter-injecting".
And such schemes help, until they hurt (a little more phase lag
in that "compensation" and you can pick up HF "whoop-de-do!"
artifacts which (you hope) something else will squash "adequately".
But adequate means different things to different people, like a
RF lineup might see that "whoop-de-do" as in-band amplified
switched harmonics mixing in.