Web caching refers to the act of storing certain web resources (i.e., pages and other data files) for possible future reuse. For example, Matilda is the first person in the office each morning, and she likes to read the local newspaper online with her wake-up coffee. As she visits the various sections, the Squid cache on their office network stores the HTML pages and JPEG images. Harry comes in a short while later and also reads the newspaper online. For him, the site loads much faster because much of the content is served from Squid. Additionally, Harry's browsing doesn't waste the bandwidth of the company's DSL line by transferring the exact same data as when Matilda viewed the site.
A cache hit occurs each time Squid satisfies an HTTP request from its cache. The cache hit ratio, or cache hit rate, is the percentage of all requests satisfied as hits. Web caches typically achieve hit ratios between 30% and 60%. A similar metric, the byte hit ratio, represents the volume of data (i.e., number of bytes) served from the cache.
A cache miss occurs when Squid can't satisfy a request from the cache. A miss can happen for any number of reasons. Obviously, the first time Squid receives a request for a particular resource, it is a cache miss. Similarly, Squid may have purged the cached copy to make room for new objects.
Another possibility is that the resource is uncachable. Origin servers can instruct caches on how to treat the response. For example, they can say that the data must never be cached, can be reused only within a certain amount of time, and so on. Squid also uses a few internal heuristics to determine what should, or should not, be saved for future use.
Cache validation is a process that ensures Squid doesn't serve stale data to the user. Before reusing a cached response, Squid often validates it with the origin server. If the server indicates that Squid's copy is still valid, the data is sent from Squid. Otherwise, Squid updates its cached copy as it relays the response to the client. Squid generally performs validation using timestamps. The origin server's response usually contains a last-modified timestamp. Squid sends the timestamp back to the origin server to find if the original resource has changed.
For a detailed treatment of web caching, have a look at my book Web Caching, also by O'Reilly.