Lionel transformers marked AC are in fact AC. You would need a rectifier to convert it to a DC output - a $3 part even at Radio Shark prices.
Before the invention of silicon diodes in the late '50s, rectifiers were relatively expensive components. And until powerful permanent magnets were developed during WW2, universal motors with wound fields that could run on either AC or DC were commonly used. Lionel, American Flyer, and Marx did not change to DC operation for their O and S toy train lines after WW2, and continued using AC (with a few rare exceptions). Their HO lines, OTOH, did comply with the 12V DC standard.
The transformer is useful as an AC power supply, and can be used as a DC power supply by adding a rectifier. But it is not a particularly good train controller even with a rectifier. Older Lionel engines typically would not run on less than 6 volts. So Lionel made many of their transformers have an initial 6 volts as soon as the throttle is moved off the peg. N scale locomotives are often going too fast at 6 volts. Use the transformer to power switch machines, lights in structures, or as a power supply to a proper throttle.
my thoughts, your choices
Fred W