Cached Exchange Mode is essentially the same as offline folders but its much easier to use. It allows you to use your current Exchange account data when you're not connected to the server (interrupted internet connection, no internet, etc).
Cached Exchange Mode stores a copy of the data inputted while not connected to the exchange server by automatically creating an offline folder file (.ost) which synchronized (when connected) changes from all of your folders altered to your mailbox on the exchange server.
How To Enable/Disable Cached Exchange Mode:
1. File > Info > Account Settings > Account Settings
2. Double click on your Exchange account
3. Check/uncheck the box for 'Use Cached Exchange Mode'
Features Requiring Cached Exchange Mode
There are quite a number of features in Outlook 2010 that require Cached Exchange Mode in order for them to work or work better. The most notable features are:
Junk E-mail Filter
Conversation View (Show messages from other folders)
People Pane / Outlook Social Connector