Caching is one way you could increase your applications response time. For an example, take
a hotel reservation system, where you might need to show a list of hotels for a particular
country in your reservation page.
For each and every reservation made by users, a service call or a direct database call is onvloved to fetch the list of hotels for the country the user has selected, and when the number of concurrent users to your system increases, the performance of your system decreases too.
To avoid these hits, caching of your hotel objects or a hotel dataset can be used, so you application can use these to respond to a request without calling the service or making a call to the database, further more the cache is updated at periodic intervals to accomadate changes to the underlying data.
Velocity is an in-memory distibuted caching solution from Microsoft, still in it's CTP,
addresses application scalabilty.
In typical applications you would cache your data in the host your application is running
in, but using Velocity, you can configure muiltple hosts (nodes) to act as your application's in-memory cache, in other words, your application cache is distributed.
This adds on the capabilty to scale you application, for an example, if a need arises, you
can easily add a another host to your existing distributed cache so increasing the
performance and through put of your application.
Although your cached objects are distributed, Velocity gives you an interface to retrive your
cached objects in a unfied way, that is in your code you would access your cached
objects as if they reside in your local machine without the need to identify in which host
the actual cached object resides.
Velocity also gives you the capabilty to duplicate your cached object in terms of a primary and secondry "caches", so that you can stil use your secondary cache if your primary cache fails, making availabilty first class.You can read more about velocity here