Solution 1:

Essentially yes. Cached Mode syncs the server and client so in the event of disruption in your connection to the server you can still work in your mail , albeit in "Off-Line" Mode. when the connection to your server is restored any changes to your local copy of your mail will be upload to the server.

If you disable cached mode, you can only use you client when you have a connection to the server. this is how Exchange primarily operated prior to Exchange 2003. I used cached mode for that reason with my users but I also use it since it gives me another backup of their email which I have found handy to have on occasion!

To answer Matt's Updated question, it doesn't delete the local ost file it just;s stope using it sync with the Exchange Server. If you ever decided to go back to cache mode (with changiing the profile) it will just pick up from where it left off..