Aegwynn started fighting the Legion on Azeroth immediately after receiving her powers. She quickly banished Zmodlor, a demon that possessed schoolchildren, even though the Council chided her for her rash actions. She told them that she intended to take a more proactive approach to fighting demons. As she spent more and more time hunting down demons, she grew to question the orders of the Council, believing them to be stodgy and set in their ways.
Five hundred years after becoming the Guardian, Aegwynn went to the continent of Northrend to fight a group of powerful demons. The demons had tracked down one of the last surviving dragonflights and were draining them of their magic. Together with the dragons, Aegwynn defeated the demons. But as they were celebrating their victory, the avatar of the fallen Titan Sargeras appeared and told Aegwynn that the world would soon bow before the Legion, bla bla bla, generic villain speech. (Sargeras is the official Big Bad of the Warcraft universe, the source of the Burning Legion and everything else bad that's ever happened. We'll get to him later, trust me.)
Aegwynn figured, hey, I'm supposed to fight the Burning Legion, so why not take the chance and try to take out their leader if I can? She readied herself and threw every power she had at the corrupted Titan, and he died easily. No, Aegwynn! Haven't you ever been a video game character before? The last boss ALWAYS has more than one phase! But Aegwynn was proud and reckless, and she thought she'd beaten Sargeras once and for all. She dragged his body to an undersea tomb and sealed him away. Unfortunately for her, Sargeras had transferred his spirit to her body at the time of her death. He wasn't able to use her himself, though. He'd need a new body to fully possess ...
Aegwynn kept fighting the remaining demons for the next seven hundred years. But after twelve hundred years of being the Guardian, her biological clock was beginning to wind down, and she knew someone else would have to take her place soon. But instead of letting the Council choose her successor, she decided to take matters into her own hands and have a kid. After considering several candidates, she chose Nielas Aran, the court wizard of Stormwind, as her lover. Aran was crushed when he learned that Aegwynn wasn't in love with him, but had just used him as her baby daddy to screw with the Council. Aegwynn kind of felt guilty about this, so when her son, Medivh, was born, she locked the powers of Tirisfal inside him and left him to be raised by Aran. Then she went off to do ... stuff. The lore doesn't say. I like to think that she spent a lot of time celebrating her newfound freedom, kind of like a thousand-year-old Lindsay Lohan on a bender.
When Medivh hit puberty, his powers went wild, killing Aran and sending the boy into a coma. Medivh awoke later with all the powers of the Guardian, but unbeknownst to Aegwynn, the spirit of Sargeras hiding inside his mother had been transferred to his body and had also awakened at puberty. I don't even want to think about the biology of how that all happened. Anyway, Medivh acted like a nice wizard and Guardian while secretly plotting with the orcs to open the Dark Portal. It gets complicated, and we covered a lot of it in Know Your Lore: Medivh.
Basically, Aegwynn overheard Medivh plotting with demons and confronted him about it. When he refused to change his ways, she fought him and was easily defeated. Medivh drained away all her remaining power. Then Medivh/Sargeras decided to give her the What My Evil Plot Is speech, and told her that when she had defeated Sargeras, he had transferred his spirit into her body and then to Medivh, and now THE WORLD WAS DOOMED ETC. Medivh then made the classic villain mistake of allowing his prisoner to get away after the What My Evil Plot Is speech.
Aegwynn ran to the court of King Llane of Stormwind, Medivh's childhood friend. She told them of what she had heard, and Llane began to develop a plan to fight Medivh. Aegwynn, however, wanted no part in her son's death. She teleported herself to the continent of Kalimdor and built herself a nice home by the shores of Ratchet, to await her own death. But Medivh had not taken the entirety of her power. She was still unable to age at a normal human rate, and she had just enough magic left to create a scrying well to look in on her son. When she saw Khadgar and Lothar kill Medivh, her heart broke. Even with her meager magic, she devised a plan to bring her son back to life. After twenty-one years of saving up her power, she brought Medivh back, without the evil spirit of Sargeras. He decided to atone for his evil deeds by traveling around and giving annoying cryptic warnings to racial leaders about how they must band together against the Legion.
This next part comes from the novel "Cycle of Hatred." Aegwynn again tried to retire to a normal, quiet life, but was located by the mage Jaina Proudmoore. Jaina wanted Aegwynn's help to relocate some Thunder Lizards. Relocate Thunder Lizards? Dude, that's the weakest possible excuse for barging in on an old lady's privacy. Jaina's subservience got on Aegwynn's nerves, which is unfortunate, because after relocating the Thunder Lizards they both got magically sealed in Aegwynn's house.
It turns out that Zmodlor, the very first demon Aegwynn ever defeated, had been resurrected by dreadlords and had concocted a plan to reform the Burning Blade cult. Zmodlor recruited advisors from Thrall and Jaina's inner circle into the cult in an attempt to force the humans and the orcs into a war. Jaina, Aegwynn, and Jaina's colonel Lorena confronted the demon, but Jaina was taken out of the fight by the Burning Blade warlocks. In a last attempt to defeat the demon, Aegwynn infused Jaina with her own life force, and Zmodlor was banished.
Where she is now: Aegwynn almost died after giving her life force to Jaina, but she survived due to the few powers she retained from her Guardianship. She accepted the position of advisor to Jaina, but insisted that her identity remain secret to keep people, demons, and the Burning Legion from bothering her. There are two women in Dustwallow Marsh that players have thought to be Aegwynn in disguise: the hermit questgiver Tabetha and Jaina's elf companion Pained. However, she's not necessarily in the game right now.
For more information: WoW.com on Aegwynn and Sargeras, Aegwynn on WoWWiki, the plot of Cycle of Hatred.