AC performs work when the voltage is negative, as well as when it is positive. This means that the "average" is an invalid measure for current or power. Instead, RMS is used.
With RMS the quantity is first squared, to "flip" the negative to positive. It is then integrated, and finally the square root is taken to remove the "error" caused by squaring.
If you perform this operation with a DC voltage, the result is simply the DC voltage. If you do it with a sinusoidal voltage, you end up with 0.707 times the peak value (amplitude) of the sinewave. With other waveforms the result will differ. For some examples, see the Wikipedia entry.
EDIT To clarify the mysterious conversion factor for sinewaves, $\sqrt2 = 0.707$$\frac{1}{\sqrt2} = 0.707$. This is also the factor you'll notice in the Wikipedia link.