purging does mean to "delete" as you no doubt suspected, but a cache in computer terms, is simply somewhere to store information to save the program some work. In other words clearing a cache means that the next time you do something it may be a little slower, but thats all.
Specifically to photoshop cache, is this : "The first time you use the File Browser to view a folder of files, you'll notice that it takes some time to gather information and build a thumbnail for each image. The next time you browse that folder, the images show up almost instantaneously. The trick? Photoshop saves the thumbnails in a cache—along with file information, ranking, and rotation setting. The cache is saved in a compressed and proprietary format on your local hard drive. "
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