The caches are files on your computer that "stores" basic information of what you're doing in your game, i.e. what objects you've placed out, the houses you've built etc. to enable the game to "find" those objects quicker. Usually, the caches may get a little overloaded after a while. The world cache, the temporary storage of data concerning your neighbourhood, is closely associated with save error 12, but it is reset each time you start up the game from the desktop. Therefore, it will be easier to save if you go out and in to the game every 2 hours or something.
I've also heard about a objects, or something similar, cache that isn't reset by itself. Normally, it doesn't pose so much of a problem, but lag and several bugs have apparently been linked to that one, which should get fixed by deleting the cache files. I've never done that, so I don't know the position of them, but unless they're some really odd cache files, it wouldn't ruin the game if you delete them. If anything, make it go slightly slower if they are to be re-created, but don't quote me on that. I don't know how those caches function.
In any case, this is the general idea about caches.
