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Caching is used to speed up a call to display() or fetch() by saving its output to a file. If a cached version of the call is available, that is displayed instead of regenerating the output. Caching can speed things up tremendously, especially templates with longer computation times. Since the output of display() or fetch() is cached, one cache file could conceivably be made up of several template files, config files, etc.

Since templates are dynamic, it is important to be careful what you are caching and for how long. For instance, if you are displaying the front page of your website that does not change its content very often, it might work well to cache this page for an hour or more. On the other hand, if you are displaying a page with a timetable containing new information by the minute, it would not make sense to cache this page.

Smarty Template Engine