From a long time series of high resolution (R=115,000) HARPS spectra and simultaneous broad-band photometry, we report new evidence for magnetospheric accretion as well as ejection processes in the nearly edge-on classical T Tauri star AA Tau. AA Tau's light curve is modulated with a period of 8.22d. The recurrent luminosity dips are due to the periodic occultation of the central star by the magnetically-warped inner disk edge located at about 9R_{star}_. Balmer line profiles exhibit a clear rotational modulation of high-velocity redshifted absorption components with a period of 8.22-days as well, with a maximum strength when the main accretion funnel flow passes through the line of sight. At the same time, the luminosity of the system decreases by about 1mag, indicative of circumstellar absorption of the stellar photosphere by the magnetically-warped, corotating inner disk edge. The photospheric and HeI radial velocities also exhibit periodic variations, and the veiling is modulated by the appearance of the accretion shock at the bottom of the accretion funnel. Diagnostics of hot winds and their temporal behaviour are also presented. The peculiar geometry of the young AA Tau system (nearly edge-on) allows us to uniquely probe the accretion-ejection region close to the star. We find that most spectral and photometric diagnostics vary as expected from models of magnetically-channelled accretion in young stars, with a large scale magnetosphere tilted by 20{deg} onto the star's spin axis. We also find evidence for time variability of the magnetospheric accretion flow on a timescale of a few rotational periods.