Loaded Chunks

Loaded Chunks/Simulated Chunks
Loaded Chunks also known as simulated chunks are the chunks that anything can normally process in. These chunks only occur around a player or created with the use of /tickingarea or Add-ons. These chunks are what players will spend their time interacting with a majority of the time.
These chunks are represented by the hex code 0x0009 in the game code.
Buffer Chunks
Around every loaded chunk is a buffer of unloaded chunks this is to improve load times and general stability of the game.
Loaded Area Size
The size of the area of loaded chunks around a player is dependent on the simulation distance setting in the world settings and it comes in four different sizes 4 chunks, 6 chunks, 8 chunks, and 12 chunks. These sizes are not radii as you may be inclined to believe but instead follow taxicab geometry, going from each corner of the central chunk containing the player. 
(blue: sim 4, green: sim 6, yellow/orange: sim 8, pink/red: sim 10, purple: sim 12)
Functions
Chunks that are loaded/simulated are able to process anything you will find in normal gameplay such as: 
Entity AI/Events
block ticking
random ticks
Entity states
It is important to note that events can happen outside of these loaded chunks. See unloaded chunks for more information.