Arduino + MAX232 + Pharos GPS360
The MAX232 is a charge pump.  It fills a cap with charge, then moves it to the other side of the supply rail.  For example, if you charge a cap on the 5V rail, then disconnect it and connect the low side of the cap to +5V, the high side will now be at +10V.

In short, the capacitors are how the MAX232 makes its high voltages from the lower supply voltage.  It will not function without caps.