Both pictures below have already been used elsewhere on this site:
badge.png came from the one image
page, and waves.png from the
three images page.

A cached file is one the browser already has on your computer, so it does not need to ask the server for it again. Sometimes it asks anyway, just to check, and the server replies 304 Not Modified, meaning "the copy you have is still fine". A 304 response is tiny because it contains no file, only that answer.
This is why a site feels faster the second time you visit it.