Caching,as it pertains to hosting a website,is the temporary storage of content. This content could be images,files,bits of PHP scripts that are pre compiled,HTML pages,results of database queries,and other web objects.
Indexing- Indexing is the process of adding webpages into google search. In order for your site's content to be included in the results of your custom search engine,they need to be included in the Google index. The google index lists all the webpages that google knows about. when google visits your site, it detects new and updated pages and updates the google index.