What is caching and why is it important in system design?

Caching stores copies of frequently accessed data in faster storage (memory vs disk, closer to user). Benefits: reduced latency (faster responses), decreased database load, improved throughput, cost savings. Cache layers: browser cache, CDN, application cache (Redis, Memcached), database query cache. Key considerations: cache invalidation (TTL, events), cache-aside vs read-through, cold start, memory limits. Caching is fundamental for performance at scale.