The same thing that any cache does. A cache simply stores smaller amounts of data that are frequently accessed so that a component doesn't have to constantly go to a slower component to receive the information. That's why the L2 cache on processors are so important (and why Intel is increasing its size with the new Penryns). This article explains things better:http://computer.howstuffworks.com/cache3.htm
bluebird basically said it all really, on a HDD it will make a difference but not a big one though around 8+mb cache is fine nto worth extra 50 dollars or so though...
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