Hard drives are used primarily for the storage of data and programs. On PCs, the game data is loaded onto the harddrive from CD or DVD for faster access times, because CD and DVD are slow in comparison.
And about caching, that depends on the terms used. World of Warcraft caches data onto the hard drive, but this data is object data used to reduce internet usage when loading players onto your PC. If the character data is not there or has some updates, the data is downloaded from server. This is the same type of cache that web browsers use.
Then there is virtual RAM. Hard drives can be used as expanded RAM, although extremely slow in comparison. The purpose is to offload less used data that is stored in RAM to virtual RAM, making more space in system RAM for data that will be used more often. When the data that is cached to virtual RAM is requested, the page of data, a predetermined size of RAM data, is swapped with a page of data in system RAM. This is an old technique used when RAM was at most 1 MB and the software needs more. It is still used today.
As far as consoles doing it, when they can. The Xbox had built-in functions to load commonly used data from the game disc to the hard drive for faster access, what your question is asking. Some PS3 games actually install data onto the hard drive, Ratchet and Clank for example, but I believe that caching feature, which is on the XBox at least, must be programmed by the developers of the game. I can say the X360 has the same caching abilities the XBox has, but I can't prove it.
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