How I think of it:
type is used for defining new union types:
type Thing = Something | SomethingElse
Before this definition Something and SomethingElse didn’t mean anything. Now they are both of type Thing, which we just defined.
type alias is used for giving a name to some other type that already exists:
type alias Location = { lat:Int, long:Int }
{ lat = 5, long = 10 } has type { lat:Int, long:Int }, which was already a valid type. But now we can also say it has type Location because that is an alias for the same type.
It is worth noting that the following will compile just fine and display "thing". Even though we specify thing is a String and aliasedStringIdentity takes an AliasedString, we won’t get an error that there is a type mismatch between String/AliasedString:
import Graphics.Element exposing (show)
type alias AliasedString = String
aliasedStringIdentity: AliasedString -> AliasedString
aliasedStringIdentity s = s
thing : String
thing = "thing"
main =
show <| aliasedStringIdentity thing