When you think of caching there are basically two types: in-process, and out-of-process (or external caching). In-process caching all happens on the host machine and often within the same JVM container (if you’re using ColdFusion specifically). That is, all caching will always reside locally, making caching operations extremely fast. The obvious downside to this method of caching is that the cache consumes the same resources that would have otherwise be spent on your application server.
In order to allow you to scale out (by adding more servers to a cluster, for example) rather than scaling up (by adding additional ram) you need to provide an out-of-process caching mechanism. Again, the obvious downside to an out-of-process setup is the fact that you must serialize and transmit data to an external JVM, which requires much more overhead and transmission time.