According to askoxford.com AESTHETIC means:
  • plural noun usu. treated as sing. 1 a set of principles concerned with the nature of beauty, especially in art. 2 the branch of philosophy which deals with questions of beauty and artistic taste.
I think that dictionary.com gives a better definition of the word because it gives multiple definitions and each one can be applied to Freud.
Dictionary.com Unabridged (v 1.1) - 
1.pertaining to a sense of the beautiful or to the science of aesthetics.
2.having a sense of the beautiful; characterized by a love of beauty.
3.pertaining to, involving, or concerned with pure emotion and sensation as opposed to pure intellectuality.
4.a philosophical theory or idea of what is aesthetically valid at a given time and place: the clean lines, bare surfaces, and sense of space that bespeak the machine-age aesthetic.
Archaicthe study of the nature of sensation.

I think that Freud wants us to think of aesthetic as a way for analyzing Fear and Dread instead of art and beauty.  They are pretty much opposites.  He uses the rest of his essay to explain what the aesthetics are of fear and dread and that part of our psyches we use to analyze those two feelings.

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