Its actually a form of database structure. When it creates the file, it allocates the full size that you specify, even though at that point its empty. Its like a big empty bucket. As you fly, data is initially read from the internet and written into the structured bucket. This takes milliseconds, and subsequent reads of the same data come from the cache. Without the cache, data is stored in a smaller temporary cache, but when you close the sim its deleted. So if you start the sim up again and decide to fly from of to somewhere you’ve already been, the computer makes network calls, dns calls, firewall makes decisions on whether or not to inspect the traffic etc etc. Its just doing a whole load of stuff that it doesn’t need to do if you have cache enabled. But what you do need to remember to do is clear the cache after an update, or if you have a problem etc.
It doesn’t do any harm to switch it on, try it for a few days, and if you’re not happy with the results, switch it off again. 
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