Hi @Arbina Inamdar
"the VM in other fault domain will be up and running."
This statement is not entirely correct, in fact the Availability set will define hardware redundancy for your vms, that is, you have two vms in different hardware sets (physical hardware failures, network outages, or power interruptions.)when a hardware fails on a fault domain, your vm on the other will not be affected
Azure virtual machine scale sets let you create and manage a group of load balanced VMs. The number of VM instances can automatically increase or decrease in response to demand or a defined schedule (The scale sets will provision more instances of your VM according to usage metrics)
In short
Availability set is hardware protection in the data center that is hosting your VM
Scale set is an increase resource for your workload on a set of VMS, which provisions more instances according to pre-defined metrics.
Get in touch if you need more help with this issue.
--please don't forget to "[Accept the answer]" if the reply is helpful--