What is Drupal caching based on? What does Drupal use for caching? Is this something like APC or memcache? Where does it store cache files?
Out of the box, it's stored in the database, in a number of tables names cache_[name_of_bin].

There are lots of other options if one wants to configure it differently.


Memcache
MongoDB A nice feature is that mongo supports replication across multiple databases
APC
Varnish Doesn't replace normal caching, but integrates with Varnish so Varnish can invalidate cache when Drupal does
Boost Can generate static HTML files from content.


Also see Lullabots Beginners guide to caching data in drupal 7 (Thanks  Chapabu!).