So I know that the union of set {A,B} is {A,B}.
It seems like you are not clear on what $\bigcup \mathcal S$ means when $\mathcal S$ is a set of subsets of $X$. The definition is:
$$
\bigcup \mathcal S=\{x\in X\mid \exists S\in\mathcal S \text{ such that } x\in S\}
$$
So while $\bigcup\{\{A,B\}\}=\{A,B\}$, it is not true that "$\bigcup\{A,B\}=\{A,B\}$."
I recall the helpful thing someone said to me the first time I was learning it: they said "it's like the union symbol breaks down the walls between sets in $\mathcal S$."
So, for example, $\bigcup \{\{a,b\},\{c,d\}\}$ dissolves the inner braces and you just get $\{a,b,c,d\}$.
As far as I know, $A\cup B$ is just a convenient shorthand for $\bigcup \{A,B\}$ in order to think of it as a binary operator. I'm not aware of any definition that defines the two differently from each other.