Temporary Internet Files
The cache or Temporary Internet Files are files like graphics, Web pages, cookies, and so forth, that are stored on your computer’s hard disk to speed up surfing. The idea is that if you surf to Amazon.com, your browser will take certain files from that site and store them on your computer’s hard drive.
Next time you surf to Amazon.com, the page should load faster because you already have some of the information stored on your computer’s hard disk as Temporary Internet Files. Now let's consider for the rest of the article that your XP login user name is called 'MyUser'. In this case all these Temporary Internet Files are stored in a special sub-directory in your 'Documents and Settings\MyUser\Local Settings' directory called Temporary Internet Files. Because it is not a regular directory, it cannot be read like a regular directory.
A regular directory gives all of the information that you would find when you use the DIR command in a command prompt session. In order to keep track of the TIF directory in such a special way, Internet Explorer will create sub-directories with random letter/number combinations to hold this information. An index.dat file keeps track of these sub-directories; then, when you open Temporary Internet Files in Windows Explorer, you'll think it was just one directory. The Recycle Bin works in a similar way.