Are you talking about the L1/2/3 cache for the processor? If so, it helps the processor store incoming instructions so that it doesn't have to wait for the info. It speeds things up quite a bit.
from what it sounds like, you have an Athlon XP either with a Palomino or with a Throughbred core, the order of cache, L1,L2,L3 is in the order of speed, the L1 being the fastest and the L3 being the slowest, which is why you notice that there is more L2 then L1 and more L3 cache (if a cpu has it) then L2 cache.
your cache size is what I would consider minimum for today's processors, though having more its definetely a benefit