Depending on your user base you may care very little about how caching works in SharePoint. But whether you plan on using it or not, you should at least know it's there and that it takes very little effort to turn it on.
Remember that almost everything in SharePoint resides in the content database. This coupled with the fact that opening a database connection is an extremely expensive operation means that there's potentially a lot more capacity to be had from a SharePoint site by simply enabling caching.
In my experience running the Microsoft Web Application Stress Tool on test SharePoint sites, most sites running caching profiles were able to achieve 33% more requests per second that those using no caching at all. That's a LOT more capacity to be had, and best of all it's free (you know...you've already paid a lot of money for MOSS).
To enable Page Output Caching you need to turn on both the Office SharePoint Server Publishing Infrastructure feature in the Site Collection and the Office SharePoint Server Publishing in the sub site. Disk Caching is turned on through the web.config.
Page Output Caching
Page Output Caching works a lot like ASP.NET page output caching, allowing you to cache pages in memory for a certain period of time and also maintain many cached versions of pages based off of Browser Type, Query String, HTTP Header, or some custom function that you write and implement in your pages. It's quite flexible.
You start off by defining Caching Profiles in Site Settings (that is, how you want to determined if something should be cached) and then assigning profiles to either of Authenticated or Anonymous users as they visit your site. For instance, you could choose to cache pages for anonymous users and not cache pages for authenticated users.
By default Cache Profiles inherit down to sub sites just like security, and like security you can change the inheritance at any sub site along the way.
The other type of caching is Disk Caching which simply stores assets that you would normally fetch from the content database on disk. Disk Caching and Page Output Caching aren't mutually exclusive and actually marry quite well together. To enable disk output caching all you really need to do is open up the web.config for the site and change the BlobCache key to look like below:
It's worth mentioning that path is a regular expressions of file types to cache to disk and maxSize is measured in gigabytes. The location is of course where these files will be persisted to disk.
I would strongly encourage you to enable caching schemes one or more of your SharePoint sites to try it out. Those that make the best candidates (stand to gain the most performance) are those that have a lot of users and have anonymous access turned on for the entire site collection (usually synonymous with public facing sites). If you think you're viewing a cached version of a page and you want to see the real content you can always suffix the query string with a nocache=1. IE. http://somedomain/Pages/default.aspx?nocache=1 displays the non cached version of default.aspx for the somedomain site.
So there it is. Enjoy your free performance gains. Like G.I. Joe says: "Knowing is half the battle."